What is the Task Force on Climate-Related Financial Disclosures (TCFD)?
- The Task Force on Climate-Related Financial Disclosures (TCFD) was created by the international Financial Stability Board (FSB) to develop consistent climate-related financial risk disclosures for use by companies, banks, and investors.
- The main objective of TCFD reporting is to disclose the climate-related risks and opportunities of a company as well as the financial impact those might have on the company’s business.
- TCFD reporting aims to provide consistent and transparent information to all financial actors and global markets.
- It is not a corporate reporting standard but a way of understanding how firms approach the financial risks and opportunities related to climate change.
Who is subject to TCFD-aligned reporting?
- The TCFD is still mainly a voluntary framework for companies of all sizes, industries and jurisdictions.
- More and more countries are looking into making TCFD-aligned climate-risk reporting mandatory.
🇬🇧 Mandatory TCFD-aligned reporting in the UK
- As of April 2022, UK companies with the following criteria are obligated to submit TCFD-aligned reporting:
◦ All UK companies that are currently required to produce a non-financial information statement;
◦ UK registered companies with securities admitted to AIM with more than 500 employees;
◦ UK registered companies which are not included in the categories above but have more than 500 employees and a turnover of more than £500m;
◦ LLPs have more than 500 employees and a turnover of more than £500m.
What do companies disclose in their TCFD-aligned report?
- A TCFD-aligned report should contain all relevant information on a company’s climate-related risks and opportunities as well as the resulting financial impacts of those.
- Companies should disclose the relevant information within the framework of the four recommended core subjects for a TCFD-aligned report:
◦ 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 & Targets: The metrics and targets used to assess and manage relevant climate-related risks and opportunities.
Where and when do companies need to disclose their TCFD-aligned report?
- The TCFD-aligned reports are to be published together with a company’s mainstream financial filings.
- TCFD-aligned reports shall be issued within four months of the end of a company’s financial year-end.
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