Legislation
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The TCFD Climate Disclosure Recommendations — What Businesses Need to Know

The TCFD framework provides consistent climate-related financial risk disclosures for use by companies in presenting their climate action to stakeholders.

With governments around the world increasingly focussing on climate disclosure, business leaders are under pressure to provide detailed reports about their carbon emissions. But with countries having differing regulations, it’s often difficult to understand what exactly needs to be reported. Here’s where the TCFD comes into play.

What is the TCFD?

The Task Force on Climate-related Financial Disclosures (TCFD) was set up by the Financial Stability Board, an international body that monitors the global financial system. Its goal is to develop consistent climate-related financial risk disclosures for use by companies in providing information to stakeholders.

What is the TCFD framework?

In 2017 the TCFD released climate-related financial disclosure recommendations designed to help companies provide better information to support informed capital allocation. The framework is based around 11 recommended disclosures, with the aim of supporting investors and reporters to understand how companies approach climate-related risks and opportunities. These disclosures broadly fit into the four key pillars of: governance, strategy, risk management and metrics.

The TCFD pillars
The 11 Recommended TCFD disclosures
  1. Describe the board’s oversight of climate-related risks and opportunities.

  2. Describe management’s role in assessing and managing climate-related risks and opportunities.

  3. Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.

  4. Describe the impact of climate-related risks and opportunities on the organisation’s business, strategy, and financial planning.

  5. Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including under a 2°C or lower scenario.

  6. Describe the organisation’s processes for identifying and assessing climate-related risks.

  7. Describe the organisation’s processes for managing climate-related risks.

  8. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management.

  9. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process.

  10. Disclose Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.

  11. Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.

Understanding the three emission scopes

In relation to point 10, here is a handy overview of the three emission scopes:

  • Scope 1 covers direct emissions from owned or controlled sources.

  • Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company.

  • Scope 3 includes all other indirect emissions that occur in a company’s value chain.

A blueprint for global disclosure frameworks

Most global disclosure frameworks use the TCFD’s 11 recommended disclosures as a benchmark. When written, these were all designed to be voluntary, but some countries have adopted them as an integral part of their regulatory framework around climate change. For example, from 6 April 2022, the largest UK-registered companies have to disclose climate-related financial information in line with TCFD recommendations.

How to start disclosing your information — CDP

The TCFD doesn’t specify where companies should file the disclosures that it recommends. Often, this depends on the requirements of the local disclosure framework being used (based on the TCFD). But the CDP, a not-for-profit which runs a global disclosure system, is becoming a popular place to file. CDP’s questionnaire covers all the 11 TCFD disclosures listed above and extends slightly beyond them. The body also runs regular workshops to support companies with making their disclosures.

Carbon footprint measurement as an important part of disclosure

Effective carbon footprint measurement enables businesses to understand their emissions and work towards achieving their reduction and offsetting objectives while being able to demonstrate quantifiable, transparent results. This information is important for point 10 of the TCFD disclosures. There are many ways to measure your footprint, but if you choose to work with a climate partner on measuring your emissions, make sure that you conduct your due diligence.