The Task Force on Climate-related Financial Disclosures (TCFD) is an initiative established by the Financial Stability Board (FSB) in 2015.
Its purpose is to develop a framework that helps organizations disclose climate-related financial information in a consistent, comparable, and decision-useful manner. The TCFD's framework provides guidelines for organizations to assess and disclose the potential risks and opportunities associated with climate change.
By adopting the TCFD recommendations, organizations can enhance transparency and enable investors, lenders, insurers, and other stakeholders to make more informed decisions about the financial implications of climate change.
The TCFD framework has gained significant recognition and support from governments, financial institutions, and businesses worldwide as a means to promote sustainable financial practices and better integrate climate-related considerations into mainstream financial reporting.
What are the 4 principles of the TCFD?
The Task Force on Climate-related Financial Disclosures (TCFD) framework consists of four key areas, known as the TCFD recommendations:
Governance
This pillar focuses on the governance structure and processes related to climate change within an organization. It includes disclosing information about the board's oversight of climate-related risks and opportunities, the management's accountability, and the integration of climate considerations into decision-making processes.
Strategy
The strategy pillar involves disclosing an organization's climate-related goals, targets, and initiatives. It encompasses information about how climate change impacts are assessed, how different scenarios (such as a 2-degree or lower pathway) are considered, and the strategic response to climate-related risks and opportunities.
Risk Management
This pillar requires organizations to disclose how they identify, assess, and manage climate-related risks. It includes disclosing the processes for integrating climate risks into existing risk management frameworks, as well as the strategies for adapting to potential physical, transitional, and liability risks.
Metrics and Targets
The metrics and targets pillar focuses on disclosing both quantitative and qualitative information related to greenhouse gas emissions, energy consumption, and other climate-related performance indicators.
This includes metrics such as carbon footprint, emissions reduction targets, and the use of scenario analysis to assess resilience and alignment with climate goals.
