Your Net-Zero Strategy
Aligning with TCFD recommendations
5 minute read The Task Force on Climate-related Financial Disclosures (TCFD) provides a framework for reporting in line with global temperature goals. With its mix of objective, subjective and forward-looking metrics, the TCFD is designed to be suitable for all companies that raise capital.
- Finding the emissions in private equity and debt funds
- How climate risk could affect corporate bonds
- How climate change could impact credit risk
- Aligning private equity portfolios with net-zero
- Getting to net-zero for endowments
- Taking your portfolio’s temperature
- Addressing climate risk through engagement
- Unpacking climate-related risks and opportunities
- Measuring the climate-alignment of your portfolio
- Categorizing climate-related financial risk
- Climate risk in equity and fixed income portfolios
- Aligning with TCFD recommendations
Climate-related financial reporting
The Financial Stability Board created the TCFD to “provide a framework for companies and other organizations to develop more effective climate-related financial disclosures through their existing reporting processes” and support “more informed investment, credit [or lending], and insurance underwriting decisions.”
Reporting of climate-related financial information can offer insights into the alignment of companies and portfolios with global climate goals. The TCFD rests on the recognition that to bring investment in sustainability to scale, investors need high-quality information about the risks and opportunities presented by rising temperatures, climate-related policies and emerging technologies.
Such reporting can benefit from an approach that looks across the whole organization. The process matters more than perfection. The TCFD encourages organizations to continue to improve and develop their climate-related disclosures over time.
Reporting pursuant to the TCFD
Listed companies with a combined market value of $25 trillion report in line with the TCFD recommendations, a 99% increase since last year. That includes nearly 1,100 financial institutions that are responsible for $194 trillion in assets. Reporting against TCFD indicators became mandatory in 2020 for the more than 2,000 asset owners, investment managers and service providers who have signed the U.N. Principles for Responsible Investment.
The TCFD rests on four pillars
Governance: Governance of climate-related risks and opportunities, including the board’s oversight and management’s role in assessing and managing them, by both the investor and the companies it invests in.
Strategy: The risks and opportunities posed by climate change, how they affect asset allocation, and the processes investors use to assess performance.
Risk management: The processes investors follow to measure, monitor and manage climate-related risks
Metrics and targets: The measures (e.g., greenhouse gas emissions) investors use and steps they can take to manage their climate-related risks and opportunities.
Seven principles for effective disclosure
To underpin its recommendations and help guide reporting, the TCFD has developed seven principles for effective disclosure. The principles are designed to help achieve high-quality disclosures that enable organizations and their stakeholders to understand the impact of climate change on the organization.
Principles for disclosures should:
- Represent relevant information
- Be specific and complete
- Be clear, balanced and understandable
- Be consistent over time
- Be comparable among companies within a sector, industry or portfolio
- Be reliable, verifiable and objective
- Be provided on a timely basis
Continue reading
- TCFD Knowledge Hub. Case studies, online sources and other resources for understanding and implementing the TCFD recommendations.
- Task Force on Climate-related Financial Disclosures, 2021 Status Report. A guide to effective climate-related financial disclosures that includes case studies.
