The Task Force On Climate-Related Financial Disclosures (TCFD) was set up in 2015 by the Financial Stability Board (FSB) as a set of recommendations. Many countries and trading blocs like the European Union, Singapore, Canada and Japan have adopted it as a regulatory framework.
What Is The FSB?
The Financial Stability Board is an international body responsible for monitoring and making recommendations for the global financial institutions and systems. Established in 2009, in response to the 2008 financial crash, as a natural successor to the Financial Stability Forum by the G20 leaders. It is a not-for-profit funded by the Bank For International Settlements.
What Are The TCFD Recommendations?
The TCFD focuses its recommendations on four key areas: governance, strategy, risk management, and metrics and targets.
- Organisations must detail the Board’s oversight of climate related risks and opportunities.
- They must also demonstrate the Senior Leadership Team and other managements’ role in assessing and managing said climate actions.
- Describe the short, medium and long-term climate related risks and opportunities identified.
- Determine the climate-related risks on their organisation’s business, financial and strategy planning.
- Prove the resilience of their organisation’s strategy, taking into consideration different climate-related scenarios. This should include a 2°C or lower scenario.
- This should include outlining the organisation’s processes for identifying, assessing and managing climate-related risks.
- As well as how this will be incorporated into their overall risk management.
Metrics And Targets:
- Organisations must disclose the metrics they are choosing to assess climate-related risks and opportunities within their strategy and risk management process.
- They must also disclose their levels of Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks.
- Organisations should share the targets used to manage climate-related risks and opportunities and their performance against said targets.
Will The TCFD Be Adopted As UK Law?
With the latest reports on greenhouse gas emissions and impacts of climate change, especially seen at COP26, UK businesses are rightfully concerned with monitoring ESG metrics and targets. ESG investment is on the rise and some industries have already begun creating voluntary standards. For example, the ESG Social Housing Working Group has set up the Sustainability Reporting Standard. Others have set up organisations which will evaluate an ESG rating for your organisation.
The government has taken note, and after Brexit has decided to adopt the TCFD as UK Law from 2023 onwards. This will make the UK the first G20 country to make it mandatory for the largest businesses to report on the TCFD. Currently all companies that are required to produce an annual non-financial information statement are required to report on the TCFD, so all listed companies, banks and insurers with over 500 employees. However, the government is looking to expand this as soon as 2025 to include a larger group of businesses.
How Can Convene ESG Help?
Convene ESG is designed to make ESG reporting smart, simple and secure. Instead of having multiple spreadsheets open at once, Convene ESG can help you collate, compile and compare all in one integrated platform. We have already produced successful ESG reports for Housing Associations across the country but are now expanding into all organisations.
Orbit Group have been very vocal about how useful they have found our software. They say it has massively reduced the time it takes to create a report so they can focus on strategising and actual efforts to improve ESG measures.