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Task Force on Climate-Related Financial Disclosures (TCFD)

The multi-stakeholder Task Force on Climate Related Financial Disclosures (TCFD) developed a number of voluntary disclosure recommendations for companies to provide information to a broad range of stakeholders. While these disclosures are not yet mandatory, best practice is to meet the demand from investors, lenders, employees and customers by making the climate-related disclosures under the TCFD framework.

The Basel Financial Stability Board (FSB) established the TCFD in 2015 in response to a request from the G20 (Intergovernmental Forum comprising 19 countries including Australia and over 75% of the worlds GDP).

The core elements of the recommended Climate Related Financial Disclosures (TCFD Report 2017) include:

  • Governance – The organisations governance around climate related
    risks and opportunities.
  • Strategy – The actual and potential impacts of climate-related risks
    and opportunities on the organisation’s businesses, strategy and
    financial planning.
  • Risk Management – The processes used by the organisation to
    identify, assess and manage climate-related risks.
  • Metrics and Targets – The metrics and targets used to assess and
    manage relevant climate related risks and opportunities.

Source: Final Report: Recommendation of the Task Force on Climate-Related Financial Disclosures.

  • Describe the boards oversight of climate-related risks and opportunities
  • Describe management’s role in assessing and managing climate related risks and opportunities

  • Describe the climate related risks and opportunities the organisation has identified over the short, medium and long term
  • Describe the impact of climate related risks and opportunities on the organisation’s businesses, strategy and financial planning
  • Describe the resilience of the organisation’s strategy, taking into consideration different climate scenarios
  • Describe the organisations processes for identifying and assessing climate related risks
  • Describe the organisations processes for managing climate related risks
  • Describe how processes for identifying, assessing and managing climate related risks are integrated into the organisation’s overall risk management
  • Disclose the metrics used by the organisation to assess climate related risks and opportunities in line with its strategy and risk management process
  • Disclose Scope 1, Scope 2 and if appropriate Scope 3 greenhouse gas (GHG) emissions, and the related risks
  • Describe the targets used by the organisation to manage climate related risks and opportunities and performance against targets

The report also highlights the 7 principles of effective disclosure:

01

Disclosure should represent relevant information

02

Disclosure should be specific and complete

03

Disclosure should be clear, balanced and understandable

04

Disclosure should be consistent over time

05

Disclosure should be comparable among companies within a sector industry or portfolio

06

Disclosure should be reliable, verifiable and objective

07

Disclosure should be provided on a timely basis

What should your organisation be doing?

The disclosures are not currently mandatory; however, it is a matter of when not if they will become mandatory. Both ASIC and APRA have cited that implementing TCFD recommendations is best practice, as such, all companies should be considering how they this framework as a way of describing how you are adapting to climate-related challenges.

ESG reporting considerations are no longer an afterthought. Stakeholders of leading organisations are demanding key decision makers factor in ESG considerations into all key business decisions. Whether this be in evaluating future projects, suppliers, new markets or labour practices, ESG needs to be at the forefront of the decision-making process.

The evidence is now clear that ESG considerations are not a financial cost but an investment that will provide improved profitability in the long term. Implementing TCFD recommendations and disclosures is a critical step in ensuring your organisation is not left at the back of the pack in being an industry leader.

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Getting the right advice

No matter your organisations size or stage of implementation, Seven Advisory has the skills and experience to help guide you on this journey.

Whether you are at the early stages of understanding how TCFD impacts your business, implementing the recommendations or ready to have your processes reviewed and verified by an independent third party, we can assist.

Seven Advisory provides a unique ESG advisory services to companies, investors and entrepreneurs developing their social license to deliver long-term value. Seven Advisory can advise you or your organisation on TCFD.

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Increasing transparency makes markets more efficient and economies more stable and resilient

Michael R Bloomberg
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