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TCFD bows out with much work still to be done
Task force highlights steady momentum in climate-related disclosures but stresses more progress needed
The Asset 12 Oct 2023

A growing number of listed companies are disclosing relevant information in line with the recommendations of the Task Force on Climate-related Financial Disclosures, but more progress is needed, TCFD says.

In its sixth and final report published Thursday (October 12), the New York City-based organization says 97 of the world’s 100 largest companies have declared support for the TCFD, are reporting in line with its recommendations, or are doing both.

For fiscal year 2022 reporting, 58% of companies disclosed climate-related information in line with at least five of its 11 recommendations, up from 18% in 2020. However, only 4% disclosed in line with all 11.

Disclosure of climate-related financial information in financial filings is limited. On average, information aligned with the 11 recommended disclosures was four times more likely to be disclosed in sustainability and annual reports than in financial filings.

The majority of jurisdictions with final or proposed climate-related disclosure requirements specify that such disclosures be reported in financial filings or annual reports.

Meanwhile, over 80% of the largest asset managers and 50% of the largest asset owners reported in line with at least one of the 11 recommended disclosures. Based on a review of publicly available reports, nearly 70% of the top 50 asset managers and 36% of the top 50 asset owners disclosed in line with at least five of the recommended disclosures.

“This final report makes clear that we’ve made tremendous strides in bringing greater transparency to financial markets for both climate related-risks and opportunities,” says Michael Bloomberg, chair of the task force and founder of Bloomberg L.P. and Bloomberg Philanthropies.While there is still much more work to do, this progress provides the forward momentum necessary to more fully integrate climate data into the global economy and spur more private investment in clean energy.”

ISSB takes over 

The TCFD was established in 2015 by the Financial Stability Board (FSB) with the support of G20 countries. The task force's recommendations are intended to help companies improve their climate-related financial disclosures, which will lead to better allocation of capital to facilitate the global effort towards a low-carbon future.

Shortly after the International Sustainability Standards Board (ISSB) released its climate-related and general sustainability-related disclosure standards in June 2023, the FSB indicated the standards, which are based on the TCFD recommendations, represent a culmination of the task force’s work. It further indicated that the task force would be disbanded upon release of its 2023 status report.

With its work coming to a close, the task force commends the FSB on its leadership in establishing the industry-led TCFD and for supporting its work. The ISSB will monitor progress on the state of climate-related financial disclosures by companies as of next year and support effective implementation of its standards.

In its final report, the TCFD urges appropriate bodies to:

  • Continue to emphasize the importance of companies’ disclosure of the resilience of their strategies under different climate-related scenarios, including a climate-related scenario aligned with the latest international agreement on climate change;
  • Ensure interoperability of the ISSB standards with regional and jurisdictional frameworks to support consistent company reporting across jurisdictions and avoid multiple reporting venues;
  • Develop implementation guidance on topics like climate-related physical risk assessment and adaptation planning, climate-related scenario analysis at a sector or industry level, and Scope 3 greenhouse gas emissions measurement at a sector or industry level;
  • Focus on decision-useful disclosure on other sustainability topics (e.g., biodiversity, water, and social issues) and consider the linkages between climate-related and other sustainability issues; and
  • Develop a climate-related financial disclosure framework for use by countries and other sovereign entities as consistent sovereign disclosure would support companies in preparing comprehensive climate-related financial disclosure.

The TCFD recommendations have helped drive greater consistency among major climate-related disclosure regimes. For example, by 2019, several major climate-related disclosure regimes had incorporated the TCFD recommendations into their requirements and guidance. In addition, several governments, regulators, and standard setters have incorporated or drawn from the TCFD recommendations in developing climate-related reporting requirements and standards, including the US Securities and Exchange Commission, the UK Parliament, the European Commission, and the ISSB.

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