Today the Financial Stability Board (FSB) published the final recommendations of the Task Force on Climate Related Disclosures. Gerald Cartigny, Chief Investment Officer (CIO) at MN: "This framework provides a good foundation for improving the ability of investors and others to appropriately assess and price climate related risk and opportunities."
The Task Force, chaired by Michael R. Bloomberg, was established by the FSB in December 2015 to develop a set of voluntary, consistent disclosure recommendations for use by companies in providing information to investors, lenders and insurance underwriters about their climate-related financial risks. The 32 industry members of the Task Force, who are drawn from a wide range of industries and countries from around the globe, finalised the recommendations after extensive public engagement and consultation, including public consultation on a draft of the recommendations in December 2016.
The TCFD developed four recommendations on climate-related financial disclosures that are applicable to organisations across sectors and jurisdictions. The recommendations are structured around four thematic areas:
- 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.
Speaking about the work of the Task Force, FSB Chair Mark Carney said “The Task Force’s recommendations have been developed by the market for the market. They set out the disclosures that a wide range of users and preparers of financial filings have said are essential to understanding a company’s climate-related risks and opportunities. Widespread adoption will provide investors, banks and insurers with that information, helping minimise the risk that market adjustments to climate change will be incomplete, late and potentially destabilising.”
Such analysis is crucial for investors seeking decision-useful, climate related financial information
Gerald Cartigny, Chief Investment Officer (CIO) at Dutch asset manager MN said, “The TCFD’s framework provides a good foundation for improving the ability of investors and others to appropriately assess and price climate related risk and opportunities. It is particularly valuable that one of the key disclosures recommended by TCFD is focused on the resilience of a company’s business strategy regarding climate-related risks, including a scenario designed to curb global average temperature rises to 2C Celsius or less. Such analysis is crucial for investors seeking decision-useful, climate related financial information.”
Stephanie Pfeifer, CEO of IIGCC added: “Better disclosure of climate risk across all key sectors must become a routine consideration for company boards and for investors going forwards. Over 360 investors who have signed a letter to G20 leaders ahead of their Hamburg summit sincerely hope that each country belonging to the G20 gives unequivocal backing to this framework and moves swiftly to ensure its prompt adoption since this is a key step towards securing a swift, smooth and prosperous transition to a low carbon global economy. IIGCC members engage with companies on matters of climate risk stand, will encourage companies to use the guidelines and stand ready to include TCFD information in their engagements, use it in their investment decisions and consider it when deciding their voting behaviour.”
More information on the work of the Task Force and its membership, as well as companies’ statements of support, are available the TCFD website.