The Taskforce for Climate-related Financial Disclosures (TCFD) recommendations, originally published in 2017, establishes recommendations for ‘disclosing clear, comparable and consistent information about the risks and opportunities presented by climate change'. There are 11 required disclosures across the categories of Strategy, Risk management, Governance and Metrics & Targets.
Who does it apply to?
From financial years beginning on or after 1 January 2021, UK premium-listed companies must include a statement in their annual financial reports explaining how the company has complied with TCFD. Where disclosures have not been met, the company must explain why and outline the steps they’re undertaking to meet full compliance - and the timelines for doing so.
The Department for Business, Energy & Industrial Strategy (BEIS) released a consultation in March 2021 on the timelines and recommendations for broadening the scope of companies required to report against TCFD. If passed this will apply from April 2022. In the EU reporting against TCFD is already encouraged, but will almost certainly become mandatory as part of the sustainability standards that European Financial Reporting Advisory Group
(EFRAG) are developing.
What do I need to think about?
Meeting all of TCFD’s requirements requires a good deal of consideration and cross-department collaboration, most likely involving your risk, finance, governance, sustainability, strategy and communications teams. The earlier you start to go through the process internally, the better – don’t leave this to the start of the reporting cycle. Here’s a good place to begin:
- Read the requirements! An obvious one you may think, but as always, the devil is in the detail. On the surface, the 11 required disclosures presented in TCFD’s Final Report appear relatively straightforward. However, the detail behind what the Taskforce recommend you disclose against each of these is contained in a separate annex – and we find some people have missed it. To complicate matters, there is currently a consultation running on updates to the annex which won’t be finalised until the autumn. In the meantime, you can read the annex with proposed changes in red from p56 and onwards here
- Set up a working group. Bring together all the key stakeholders and establish what information you already have, where there are gaps, and where you might need a helping hand
- Involve your leadership. Governance is a core element of TCFD and investors are expecting CEOs to have a clear plan in place for climate change
- Bring in experts where you need them. We’re helping clients navigate the requirements and work out how to communicate them best. Clients are also finding that the scenario analysis element of the disclosure, if done properly, requires support from technical sustainability experts. Get in touch with us if you’d like to discuss moving this forward
- Define a clear roadmap to compliance. As well as being helpful internally, you will need to communicate this in your annual report
As always, the best reporting comes when disclosure isn’t generic and tick-box, but rather told through the bespoke lens of your company. That’s the tricky bit, and where we’d love to help. For more information on TCFD or to chat about any of your reporting challenges, get in touch. We can also help if you’re reporting from another location – drop us a line if you’d like some help working out what aspects of TCFD apply to you.