‘Climate risk is financial risk’: TCFD surpasses 1,000 global supporters

The Task Force on Climate-related Financial Disclosures (TCFD) has revealed that more than 1,000 organisations are supporting its recommendations, including corporates with a combined market cap of $12trn and investors with $138.8trn of assets under management collectively.

‘Climate risk is financial risk’: TCFD surpasses 1,000 global supporters

The TCFD formed in 2015 and launched its recommendations in June 2017

In a statement published today (12 February), the TCFD revealed that 1,027 organisations have supported one or more of its recommendations since the framework was first launched in June 2017.

Organisations in this cohort, TCFD chair Michael Bloomberg said in a statement, hail from 55 nations. Bodies represented include seven national governments, including the UK and France; 473 private financial firms collectively responsible for assets valued at $138.8trn (£107trn); central banks; regulators; stock exchanges; and corporates with a combined market cap of $12trn (£9.25trn).

From the business side, the TCFD says that the chemicals, energy, insurance, metals and mining, fossil fuel and transport sectors are best-represented in the cohort.

The TCFD recommendations urge organisations to achieve board-level governance of climate risk and opportunity assessments; develop strategies aligned with global climate targets; disclose risk management processes and metrics and report annually on greenhouse gas (GHG) emissions. The strategy piece notably includes a recommendation for firms to conduct scenario analysis, mapping how different global temperature increases, including the Paris Agreement’s 2C trajectory, would impact their financial standing.

Mary Schapiro, who heads the TCFD Secretariat, said the increased support for the recommendations serves as evidence that “companies and global organisations are accepting that climate risk is financial risk”.

“Today’s announcement also underscores the significant investor demand for information that will help them mitigate potential risks and evaluate opportunities in the transition to the low-carbon economy,” Schapiro added.

Disclosure boons and barriers

Schaprio’s comments come after the TCFD concluded, in its latest annual status report, that the investor community is demanding more climate-related information from corporates than current TCFD efforts have bred.

While noting that pledges to support the TCFD recommendations had increased by 50% between 2018 and 2019, the status report highlighted the fact that disclosure efforts had resulted in a mix of full and partial information, with some sectors more advanced in completing disclosures than others.

PwC said at the time that scenario analysis was proving a particular challenge for businesses, in terms of data availability and due to the lack of standardised metrics and requirements.

Since then, the TCFD itself has not set recommendations on which scenarios businesses should analyse, how they should do so, and how many scenario analyses would be considered sufficient. But is has created an online knowledge hub where companies can access case studies and e-learning.

The UK Government, meanwhile, has said it will mandate TCFD-aligned disclosures for certain large organisations within three years, under its Green Finance Strategy. Calls are now growing for more Government clarity ahead of the TCFD mandate to help businesses determine how to meet its scenario analysis requirements.

“Only two years after the final TCFD recommendations were published, demand for climate-related financial disclosures has skyrocketed and the supply is responding,” Bank of England Governor, TCFD architect and Boris Johnson’s COP26 finance advisor Mark Carney said.

“In this year of climate action, let’s build on this momentum to improve the quality and quantity of disclosure and build a market in the transition to net-zero.”

Sarah George

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