The TCFD also issues implementation guidance and opens public consultation period to solicit input on forward-looking metrics
The Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board (FSB), published its 2020 Status Report today. Reviewing 1,700 companies’ reports using artificial intelligence technology, the Task Force found that disclosure of climate-related financial information aligned with the TCFD recommendations has steadily increased since the recommendations were published in 2017. The largest increases relate to companies disclosing how they identify, assess, and manage climate-related risk. Industries considered most exposed to material climate risk have led with the highest levels of TCFD disclosure.
To date, more than 1,500 organizations have expressed their support for the TCFD recommendations, representing an increase of over 85% since the 2019 status report. However, despite the significant momentum, the 2020 Status Report highlights the continuing need for progress in improving levels of TCFD-aligned disclosures given the urgent demand for consistency and comparability in reporting. In particular, disclosure of the potential financial impact of climate change on companies’ businesses and strategies remains low.
Key findings from the Task Force’s review of company disclosures, insights from users, and other research include:
• Energy companies and materials and buildings companies are leading on disclosure, with an average level of TCFD-aligned disclosures of 40% for energy companies and 30% for materials and buildings companies in fiscal year 2019.
• Expert users of disclosure identified the impact of climate change on a company’s business and strategy as the “most useful” information for financial decision-making.
• Asset manager and asset owner reporting to their clients and beneficiaries is likely insufficient.
• The report also provides an illustrative ‘roadmap’ for preparers by highlighting insights from expert users on which information is most useful for decision making
To support companies’ implementation efforts, the Task Force is issuing two guidance documents with the release of this status report:
• Guidance on conducting climate-related scenario analysis; and
• Guidance on integrating climate-related risks into existing risk management processes and disclosing those processes.
The Task Force also seeks feedback on its consultation on decision-useful, forward-looking metrics for the financial sector. Publication of the consultation document today begins a 90-day public consultation period, ending January 27, 2021.
The Task Force will deliver its next status report to the FSB in September 2021.