The Task Force on Climate-related Financial Disclosures (TCFD) – Implementation Guide

Davy has published The Task Force on Climate-related Financial Disclosures (TCFD) – Implementation Guide. This guide reviews the evolution of Taskforce on Climate-related Financial Disclosure (TCFD) as a cornerstone of the non-financial reporting landscape plus the benefits to businesses from disclosing in line with its recommendations. The paper also details the ten key steps to implementing and disclosing in line with the TCFD recommendations, with practical examples showcasing how leading global companies are tackling reporting requirements such as climate scenario analysis, how they are leveraging their existing reporting resources like ERM for climate plus effective reporting and disclosure of their TCFD alignment progress. 

Key takeaways from our implementation guide

• The Taskforce on Climate-related Financial Disclosures (TCFD) is now the most widely recognised international initiative for organisations to assess and report the impacts of climate change; the United Nations Climate Conference (COP26) in November 2021 has accelerated this trajectory.

• Disclosure against the recommendations of the TCFD is becoming mandatory in an increasing number of jurisdictions, most recently in the UK. We expect to see more commitments to mandatory TCFD reporting.
• Global shareholders are becoming increasingly vocal in demanding that their portfolio companies disclose their exposure to climate change risks and opportunities based on the framework.
• The TCFD framework should be used by individual companies to assess the impact that climate change will specifically have on their business and how it will be reflected in their financial statements and narrative disclosures.
• TCFD is a forward-looking assessment of how companies are managing climate related risks and opportunities and is contextual and subjective versus more data driven reporting frameworks. As a result, it allows greater opportunity for an individual company to differentiate itself from peers.
• TCFD should not be viewed in isolation; rather, it builds on what other organisations in the reporting space have been doing to date such as the CDP or the Science Based Targets initiative (SBTi). If companies already have climate frameworks in place, they may require only a minimal level of additional disclosure to fully incorporate the recommendations.
• Disclosure to TCFD recommendations should be clear and effective, outlining the material risks and opportunities against different climate scenarios and timeframes but, critically, also disclosing how far the organisation is along in the process.
• This is an iterative process, built off strong foundations of capabilities and expertise built over time. It is better to disclose the work that is being done and the timeframes for completion, keeping investors informed, rather than immediately rushing to conduct quantitative scenario analysis using complex climate models at the outset.
• Many leading global companies are taking a non-prescriptive path to build a robust model to truly understand and manage their climate-related risks and opportunities.