Sustainable Investment Insights: TCFD - 1 Year On

What is the Task Force on Climate-Related Financial Disclosures (TCFD) and why is it important?

Set up by the Financial Stability Board (FSB), the TCFD seeks to develop recommendations for voluntary climate-related financial disclosures that are consistent, comparable, reliable, clear, and efficient, and provide decision-useful information to lenders, insurers, and investors. 

  • Better access to data will enhance how climate-related risks are assessed, priced, and managed. 
  • Companies can more effectively measure and evaluate their own risks and those of their suppliers and competitors. 
  • Investors will make better informed decisions on where and how they want to allocate their capital. 
  • Lenders, insurers and underwriters will be better able to evaluate their risks and exposures over the short, medium, and long-term.
  • The TCFD represents an opportunity to bring climate-related financial reporting to a mainstream audience.

Core Elements of Recommended Climate-Related Financial Disclosures

  • Governance: The organisation’s 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.

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