The Task Force on Climate-related Financial Disclosures (TCFD), which was established in 2015 to develop consistent climate-related financial risk disclosures for use by companies, banks, and investors in providing information to stakeholders, has released its 2021 update. Shane O'Reilly, of our Sustainable Futures team, explains.

In his address to the Financial Stability Board (FSB), Task Force Chairman Michael Bloomberg outlined the increased support globally for TCFD and the importance of climate reporting standardisation in order to meet capital markets needs for sustainable and resilient investments. Multiple jurisdictions have proposed or finalised regulations to require disclosure aligned with the TCFD recommendations — some coming into effect as early as 2022.

There has been a significant number of additional organisations which have pledged support to the TCFD recommendations, with the increase in disclosures between 2019 and 2020 being larger than ever. Europe remains the largest region for disclosure reporting. The Task Force has also updated its implementation recommendations (first introduced in 2017), as well as developing guidance to further assist companies with reporting on climate metrics, targets and transition plans.

From an Irish perspective, Finance Minister Paschal Donohoe publicly endorsed the TCFD recommendations in November 2020, stating that the government is “actively encouraging greater take-up” among Irish firms. To support government efforts, Sustainable Finance Ireland has initiated a campaign modelled off the Japan TCFD Consortium platform to accelerate Irish firms’ commitment to the TCFD framework.  

Read the 2021 TCFD Status Report here.

Key update points

  • Disclosure increased more between 2019 and 2020 than in any previous year assessed
  • Companies remain more likely to disclose information on their climate-related risks and opportunities (under the Strategy pillar) than on any other recommended disclosure
  • Governance recommendation remains the least disclosed recommendation with the two Governance recommended disclosures the second and third least disclosed.
  • Materials and buildings companies now lead on disclosure
  • Insurance industry significantly increased its average level of disclosure by 11 percentage points between 2019 and 2020
  • Europe remains the leading region for disclosures. European companies have increased their average disclosure by 15 percentage points since 2019

Initiatives supporting TCFD

  • Since the 2020 TCFD status report, over 1,000 additional organisations have pledged support for the TCFD recommendations.
  • As of October 6, 2021, the Task Force had over 2,600 supporters globally, including 1,069 financial institutions, responsible for assets of $194 trillion.
  • TCFD supporters now span 89 countries and jurisdictions and nearly all sectors of the economy, with a combined market capitalisation of over $25 trillion — a 99% increase since last year, as shown
  • European Union: In April 2021, the European Commission issued a proposed Corporate Sustainability Reporting Directive (CSRD) that would amend existing reporting requirements. The EC noted that the reporting standards should consider existing standards and frameworks, including the TCFD framework, which would lead to TCFD-aligned reporting for nearly 50,000 large companies with a presence in the European Union.
  • United Kingdom: In November 2020, the UK’s Chancellor of the Exchequer announced the UK’s intention to mandate climate disclosures by large companies and financial institutions by 2025. In December 2020, the Financial Conduct Authority introduced new rules for companies with a UK premium listing to disclose climate related risks and opportunities in line with the TCFD recommendations on a comply or explain basis.
  • Earlier this year trustees of the International Financial Reporting Standards (IFRS) Foundation signalled their intentions to establish an International Sustainability Standards Board (ISSB) under the IFRS reporting framework.

State of Climate-Related Financial Disclosures

The 4 pillars of the TCFD are Governance, Strategy, Risk Management, and Metrics & Targets.

Four pillars of the Task Force on Climate-related Financial Disclosures

Insights into disclosure of climate-related financial impact

FSB requested that the TCFD “undertake further analysis on the extent to which organizations describe the financial impact of climate-related risks and opportunities on their businesses and strategies.”

Further work to address implementation issues

Task Force released two supplemental documents simultaneously with this report:

  1. The Task Force updated its Implementing the Recommendations of the Task Force on Climate related Financial Disclosures (2021 annex), which was originally released in 2017
  2. The Task Force also developed guidance to assist companies with disclosure of climate related metrics, targets, and transition plans.

Next steps

  • Task Force will continue to promote and monitor adoption of its recommendations, along with any further work necessary to support preparers’ efforts to implement TCFD recommendations
  • TCFD Secretariat is supporting the efforts of IFRS to develop a global baseline sustainability reporting standard and will continue to provide technical advice to jurisdictional efforts.

KPMG's climate risks & opportunities platform

Climate change poses new risks and creates new opportunities for businesses. To proactively manage these risks and opportunities organisations need to develop a detailed understanding of the impact of climate change on their business model. This allows for a full integration of climate risks and opportunities into core organizational processes.

KPMG’s TCFD Climate Maturity Assessment and climate risk scenario analysis helps you to take the first step towards climate resilience and fulfilling the TCFD Recommendations. It has been developed by interdisciplinary experts and leverages progressive technology to intuitively evaluate the climate maturity level of your organisation, its climate processes, methods, and related disclosures, and visualises results considering best practice benchmarks.

Get in touch

If you have any queries on the TCFD Status Report, or climate-related financial disclosures, please get in touch with Shane O'Reilly. We’d be delighted to hear from you.