As the world becomes increasingly aware of the need to combat climate change, more and more businesses are being called upon to act and disclose their environmental impact. One of the most widely recognised reporting frameworks for doing so is the Task Force on Climate-related Financial Disclosures (TCFD).
What is TCFD?
TCFD is an international organisation that was established in 2015 by the Financial Stability Board (FSB). Its main goal is to provide recommendations for how companies should disclose information about their exposure to climate-related risks and opportunities. The TCFD‘s recommendations are voluntary, but they are becoming increasingly popular among businesses of all sizes and sectors as demonstrate their commitment to sustainability and help to build trust with investors, customers, and other stakeholders.
The number of TCFD reporting companies is growing. For the 2021 fiscal reporting year, 80 percent of companies disclosed with one of 11 recommended disclosures, according to the FSB.
Are TCFD disclosures mandatory?
As of 2021, the Task Force on Climate-related Financial Disclosures (TCFD) recommendations have been voluntary, and not mandated for any specific countries. However, the TCFD framework has been widely recognized by financial institutions, investors, and governments globally as the standard for climate-related financial disclosures. Certain countries, such as the United Kingdom, have implemented regulations that mandate certain entities to report in accordance with the TCFD recommendations. Despite this, as the TCFD recommendations are voluntary, there is currently no definitive list of countries that mandate TCFD disclosures.
What to know about TCFD reporting requirements in 2023
Here are five things to know about TCFD reporting in 2023:
- The TCFD recommendations on climate-related disclosures includes guidance on how to disclose information about the physical risks of climate change, such as sea level rise and extreme weather events. This is especially important for companies that have operations in coastal or low-lying areas, as well as those that are exposed to the risk of natural disasters.
- The TCFD is also encouraging companies to disclose information about their transition risks, which are the risks associated with the shift to a low-carbon economy. This includes risks related to the availability and cost of capital, as well as the potential impact of climate-related policies and regulations.
- One of the key themes of TCFD reporting in 2023 is the importance of scenario analysis. This involves a “process for identifying and assessing the potential implications of a range of plausible future states under conditions of uncertainty.” This is to help companies understand the potential impact of climate change on their operations and financial performance.
- Another important aspect of TCFD reporting in 2023 is the emphasis on forward-looking information. This means that companies should be disclosing information about their plans and strategies for managing climate-related risks and opportunities, rather than just historical data.
- Finally, it’s worth noting that TCFD reporting is not just for large companies. Small and medium-sized businesses are also encouraged to disclose their climate-related information, as it can help them to identify and manage their own risks and opportunities.
TCFD reporting help guidance with world-class sustainability consultancy and technology.
Meeting the TCFD’s reporting requirements can be a daunting task for businesses, especially for those that are new to the process. However, there is a solution that can help.
Energy and carbon management technology, such as automated carbon emissions and energy consumption reporting tools, can make it easier for companies to track and disclose their climate-related information.
These tools can help businesses to identify areas where they can reduce their carbon footprint, as well as monitor their progress over time. By using these tools, businesses can streamline their TCFD reporting process and demonstrate their commitment to sustainability.
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