Deep Dives

How to get started with TCFD

Stewart Rassier
May 23, 2023
Deep Dives

How to get started with TCFD

Your C-suite and investors want to make a commitment to TCFD.  However, what exactly does that entail, and how can you accomplish it in a credible manner?  Let's start by providing a clear overview of TCFD and then explore various viable approaches that align with your climate strategy, programs, and metrics.

The Taskforce on Climate-Related Financial Disclosures (TCFD) is a reporting framework that focuses on an organization’s climate-related physical and transitional risks. This framework is often complemented by other reporting frameworks and standards such as GRI, SASB, and CDP.  Established in 2015 by the Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, TCFD aims to develop consistent and transparent frameworks for companies to disclose climate-related financial information. The adoption of the TCFD recommendations has gained momentum globally over the past several years, and is referenced by SEC and CSRD legislation. 

If you are considering or just getting started with TCFD, here is what you need to know:

Why do companies use TCFD to disclose their climate risk and strategy?

TCFD helps organizations communicate how prepared they are to respond to risks posed by climate change and the transition to a low-carbon economy. TCFD includes disclosures on an organization’s climate governance, strategy and relevant metrics and targets. In addition, responding organizations are encouraged to conduct climate scenario analysis to better understand their climate-based risks and opportunities. 

What are the key aspects of a TCFD response?

Governance: Disclosing the governance structure and processes in place to manage climate-related risks and opportunities.

Strategy: Disclosing the actual and potential impacts of climate-related risks and opportunities on the company's businesses, strategy, and financial planning.

Risk Management: Disclosing the processes in place to identify, assess, and manage climate-related risks.

Metrics and Targets: Disclosing the metrics and targets used to assess and manage climate-related risks and opportunities.

Why should companies use TCFD to guide disclosures? 

TCFD is a valuable tool for evaluating organizational resilience in the midst of increasingly complex challenges as a result of climate change. A baseline understanding of risk exposure can strengthen your sustainability strategy. The TCFD framework is also valuable for providing information that informs stakeholders and sustainability raters and rankers.

How does a company assess its climate risk?

Climate scenario analysis  is essentially an  assessment of potential future outcomes of climate change. It is a process for evaluating these possible climate outcomes as they may impact a business’ operations, profitability, and resilience. Scenarios may include emerging risks such as drought, wildfires, rising sea levels, and flooding.

These considerations should be considered for the corporate entity and throughout its value chain. When companies evaluate their processes and value chain through the lens of climate scenario analysis, they can better identify where to develop risk mitigation and prevention plans.Climate scenario analysis can also help organizations evaluate opportunities in the transition to a low-carbon economy, like creating or adopting new technologies that provide both long-term financial and environmental benefits. 

How do organizations get started with TCFD?

While every organization functions differently and requires a unique approach, below we’ve outlined guidance based on aspiration and data available.

If you have questions about your sustainability strategy or would like support on your TCFD journey, contact us.

How to get started with TCFD
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