Task Force On Climate-related Financial Disclosures

Environmental
:   
Frameworks and Standards
March 13, 2023

The Task Force on Climate-related Financial Disclosures (TCFD) is an initiative established by the Financial Stability Board (FSB) in 2015. The TCFD's primary goal is to develop consistent and effective climate-related financial disclosures that enable stakeholders, including investors, lenders, and insurance underwriters, to better understand the climate-related risks and opportunities faced by organizations.

The TCFD recognizes that climate change poses significant risks to the global economy, financial markets, and organizations. It emphasizes the need for organizations to assess and disclose the potential financial impacts of climate-related risks and opportunities in their operations, strategies, and governance.

The TCFD framework provides recommendations for organizations to disclose information in four key areas:

  1. Governance: Disclosing how an organization's board and senior management oversee climate-related risks and opportunities, including their roles, responsibilities, and oversight processes.
  2. Strategy: Disclosing the organization's climate-related risks and opportunities, considering various scenarios, and outlining how these factors are integrated into its overall business strategy.
  3. Risk Management: Disclosing the processes and mechanisms in place to identify, assess, and manage climate-related risks, including physical, transitional, and liability risks.
  4. Metrics and Targets: Disclosing the metrics, targets, and methodologies used to assess and track climate-related risks and opportunities, including greenhouse gas emissions, energy consumption, and other relevant indicators.

The TCFD framework is voluntary but has gained significant international recognition and support. Many organizations, financial institutions, and governments have started adopting the TCFD recommendations as part of their climate-related reporting and disclosure practices. The framework aims to improve transparency, facilitate informed decision-making, and promote more effective responses to climate change risks across financial markets and sectors.

By promoting consistent and comparable climate-related financial disclosures, the TCFD seeks to enhance understanding, assessment, and ultimately the management of climate-related risks and opportunities by market participants, contributing to more sustainable and resilient financial systems.

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