TCFD stands for Task Force on Climate-Related Financial Disclosures. This was an initiative founded in 2015 by the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system. The FSB founded the TCFD at a time when the financial impacts of climate change were recognized, but there wasn’t a standardized way to identify and report those impacts, particularly to investors.
So the FSB gathered representatives from various financial services organizations, including the banking industry, insurance, asset management, pension funds, consulting, and other financial organizations to join the Task Force. These representatives worked together and considered public feedback on how to promote transparency of climate risks.
The TCFD recommendations were initially released in 2017 and updated in 2021. The recommendations are structured around four key themes: Governance, Strategy, Risk Management, Metrics & Targets. Each of these themes inform and are informed by each other. This is a framework for a company to follow as it identifies its physical and transition climate change risks and opportunities; how those risks are incorporated into their risk management practices, how these risks and opportunities are accounted for in the company’s strategy, and how the executive team and board monitors the work and progress.
Using the TCFD is a useful way to start climate risk reporting and other disclosure frameworks are aligned with TCFD guidelines. TCFD reports are currently required by financial system regulators in the UK, Singapore, Egypt, and New Zealand.