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TCFD launches consultation on climate-related financial disclosures

  • IFRS - FSB (Financial Stability Board) Image

Dec 14, 2016

On December 14, 2016, the Task Force on Climate-related Financial Disclosures (TCFD) published a consultation paper with recommendations for effective disclosure of climate-related financial risks. The TCFD was set up by the Financial Stability Board (FSB) to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to lenders, insurers, investors and other stakeholders.

The consultation document notes that one of the essential functions of financial markets is to price risk to support informed, efficient capital-allocation decisions and maintains that:

One of the most significant, and perhaps most misunderstood, risks that organizations face today relates to climate change. [...] Many organizations incorrectly perceive the implications of climate change to be long term and, therefore, not necessarily relevant to decisions made today.

The TCFD has developed four widely adoptable recommendations on climate-related financial disclosures that are applicable to organizations across sectors and jurisdictions:

  • Governance: Disclosure of the organisation’s governance around climate-related risks and opportunities
  • Strategy: Disclosure of the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
  • Risk management: Disclosure of how the organisation identifies, assesses, and manages climate-related risks
  • Metrics and targets: Disclosure of the metrics and targets used to assess and manage relevant climate-related risks and opportunities

The TCFD recommends that preparers of climate-related financial disclosures provide such disclosures in their mainstream reports. The TCFD also recommends the disclosure of potential impacts of climate-related risks and opportunities under different potential scenarios, including a 2° Celsius scenario.

Review the draft recommendations on the TCFD's website. The recommendations are open for public consultation over the next 60 days.

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