Blog | Task Force on Climate-related Financial Disclosures (TCFD) Recommendations

Why are they important for business?

As a result of the risks posed by climate change, governments and private sector entities have been working on a range of options to reduce global emissions. Despite these efforts, investors, lenders, and insurers currently do not have a clear vision of which companies will be sustainable over time and may face the changes caused by new regulations, the emergence of new technologies, and changes in customer behavior.

Financial markets need complete, reliable, and clear financial information related to climate change impacts. In this way, they can assess the risks and opportunities related to climate change and climate-related policies.

For this reason, the Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD), a framework that presents a series of recommendations to improve and increase the reporting of climate-related financial information. In this way, stakeholders can make more informed investment, credit, and insurance underwriting decisions. As well as better understand carbon asset concentrations in the financial sector.

TCFD’s disclosure recommendations are structured around four thematic areas that are related to each other and are the strategic thrusts of any company. These are governance, strategy, risk management, and metrics and objectives. Each thematic area is made up of different recommendations for a total of eleven.

Reporting with this framework will allow companies to effectively incorporate and assess climate-related risks and opportunities in their risk management and strategic planning processes that are of interest to investors, suppliers, and competitors. Similarly, they will be able to make more informed decisions about where and when to allocate their capital.

As this happens, companies and investors will have a better understanding of financial information related to climate change, enabling markets to make better investment decisions towards sustainable and resilient solutions, opportunities, and business models.