Climate change remains one of the most important challenges for a long period of time. Hopefully, there is an organization that works hard to help companies. The Task Force on Climate-Related Financial Disclosures (TCFD) is an interesting organization. The goal of TCFD is to develop a set of voluntary climate-related financial risk disclosures which can be adopted by companies. This way, companies will be able to inform investors and people about the risks they face related to climate change.
The Financial Stability Board (FSB) formed this organization, as a means of coordinating disclosures among companies impacted by climate change. Currently, Michael Bloomberg is the chairman of TCFD and as such, he began issuing recommendations to companies in 2017. This organization helps companies in their disclosures of pertinent information related to climate-associated financial risks.
Importantly, the goal of these recommendations was to provide companies a structure and impetus for disclosing information. This way it is easier to inform financial markets and investors. However, the recommendations issued by TCFD are voluntary. They act as guidelines to assist businesses when it comes to identifying and sharing both risks and opportunities.
Thanks to this move, investors, lenders, and others will have a more complete picture when assessing the value of companies. Moreover, the goal of this organization is to encourage sustainable investments. Such investments have the potential to play an important role, in building a more resilient economy.
Climate change and TCFD
It is desirable to learn more information about TCFD. The Task Force on Climate-Related Financial Disclosures consists of 31 members selected by FSB. This organization has the ability to help companies. Thanks to consistent, reliable disclosures markets will be better equipped to evaluate and manage those risks. This is not the only reason as companies themselves will be better able to evaluate their own risks and those related to business partners.
Investors will also benefit from superior information and it will be easier to make decisions. Climate change is a complex issue and it requires a complex solution. The TCFD represents an industry-led attempt at unifying disclosures in this area. Other organizations as well as many NGOs also contributed to this initiative. But this organization has the potential to bring about dramatic, industry-wide shifts.
The TCFD published its recommendations in 2017. Moreover, the organization published two status reports. The first one in September 2018 and the second in June of 2019. This progress includes, as of the 2019 report, the conclusion of a 3-year review of the disclosures of over 1,000 large companies across sectors and regions. According to the report, the disclosure of climate-related financial information has grown since 2016. However, it is generally not up to the standards set by the Task Force.
According to the organization, there is a need for additional clarity related to discussions of potential financial impacts of climate-based issues for companies. Typically, the companies that use scenario analysis to access the resilience of their strategies in the face of climate risks don’t disclose information regarding the results of those scenarios.
Climate change has the potential to create numerous challenges and companies should pay more attention to this issue. The organization’s recommendation suggests that companies disclose governance regarding climate-based risks and opportunities. Thus, it is important to come up with strategies for addressing such factors.
The TCFD’s efforts are ongoing and will evolve over time as more information about the impact of climate change on business will become available. This organization spent several years exploring this issue and this fact shows its commitment to solving this problem. The Task Force on Climate-Related Financial Disclosures has the ability to help companies.