TCFDs were established in 2015 by the Financial Stability Board to identify climate related information requirements in the market and provide a set of recommendations. They evolved into a set of 11 recommendations and organised under four pillars: governance, strategy, risk management and metrics and targets.
The TCFD pillars and recommendations are as follows:
- Describe the board’s oversight of climate related risks and opportunities
- Describe the management’s role in assessing and managing climate related risks and opportunities
- Describe the climate related risks 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 related scenarios, including a 2 degree C or lower scenario
- Describe the organisation’s processes for identifying and assessing climate related risks
- Describe the organisation’s 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
Metrics and Targets
- 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
TDFCs are essentially a reporting mechanism that allow organisations a framework with which to declare their approach to climate change and sustainability issues.
Do you have a legal obligation?
Originally endorsed by the Government and included in the 2019 Green Finance Strategy, they have since been mandated as a legal requirement and, from 6 April, all UK companies that have over 500 employees or a turnover of more than £500m will need to comply for accounting periods starting on or after that date. If you are in a position where have not reported on TCFDs before, there is a lot to do and, even if you have made a start and are providing some reporting information then you need to be completely aware of the requirements and put in place the reporting mechanism required to source, collate, and structure the data.
How to comply
One thing to be aware of is the forward-looking nature of the requirements, which includes reporting on risks and opportunities over the short, medium, and long-term. To work towards compliance, organisations must: Understand the requirements Put processes in place to create and manage the information Ensure it is available in a timely fashion to support the delivery of accurate reporting. At Project One, we are supporting organisations with some of their most complex compliance and reporting obligations. This experience, together with our expertise in managing complex change and understanding of climate change and sustainability, positions us well to help deliver on TCFD compliance
Do you need help with TCFD compliance?
If you need support in getting ready to comply with TCFDs or in setting up your climate change and sustainability transformation activity, such as Net Zero Carbon strategy and transformation, please get in touch.