“As you know, warming of the planet caused by greenhouse gas emissions poses serious risks to the global economy and will have an impact across many economic sectors. It is difficult for investors to know which companies are most at risk from climate change, which are best prepared, and which are taking action.”

- Michael Bloomberg


Bloomberg, Chair of the TCFD, wrote the above in his opening remarks for the 2017 Final Report – Recommendations of the Task Force on Climate-related Financial Disclosures. The purpose of the TCFD is to help investors know the risk companies face so their investments are better informed. In Bloomberg’s words, the widespread adoption of the TCFD’s recommendations “will ensure that the effects of climate change become routinely considered in business and investment decisions.”


What is the TCFD? 

The TCFD, established by the Financial Stability Board (FSB) in 2015, is an industry-led organization set up to develop and promulgate climate-related financial disclosures. The disclosures are designed to solicit consistent, decision-useful information on the material financial impacts of climate-related risks and opportunities, allowing companies to better inform investors, lenders, insurers, and other stakeholders.

The 32-member international task force is made up of experts from the financial and non-financial sectors as well as others; and as of February 2021, it had more than 1,500 supporters including nearly 500 financial firms.

The TCFD aims for greater awareness of the risks and opportunities associated with climate change. Its leadership believes more awareness comes from better information, and better information comes when companies transparently disclose the risks they’re facing.

“We believe that better information will allow companies to incorporate climate-related risks and opportunities into their risk management and strategic planning processes. As this occurs, companies’ and investors’ understanding of the financial implications associated with climate change will grow, empowering the markets to channel investment to sustainable and resilient solutions, opportunities, and business models.”

- Financial Stability Board on the Task Force on Climate-related Financial Disclosures


What is TCFD reporting? 

TCFD reporting is voluntary disclosure of climate-related risks and opportunities in an organization’s annual report.  

To simplify the process, the TCFD has outlined specific recommendations for the information companies should disclose, placing it in four categories: governance, strategy, risk management, and metrics and targets.

Within each, recommended disclosures are spelled out clearly:


The administrative policies for climate-related risks and opportunities, and the role of the board and management to assess those.


Short-, medium-, and long-term risks and opportunities; the financial, strategy, and overall business impact of those; and the resilience of a company's organizational strategy to cope with climate-related scenarios.

Risk Management

Processes for identifying, assessing, and managing climate-related risks and the integration of those processes into an organization’s broader risk management strategy.

Metrics and Targets

The metrics an organization uses in their strategy and risk management plan mentioned above, Scope 1, 2, and 3 (when appropriate) greenhouse gas emissions (GHG), and the targets organizations use to manage risks and opportunities.

TCFD four thematic recommendations.

The TCFD also outlines seven principles to guide high-quality disclosures, including consistency, reliability, timeliness, and relevance, among others.


What Are Best Practices for Reporting?

Since 2017, as organizations have begun voluntarily reporting, best practices have also started emerging. Effective actions companies can take include:

1. View the Recommended Disclosures Holistically

While each component is significant in and of itself, the recommendations are designed for interconnectivity. The TCFD Good Practice Handbook suggests when a company’s leadership looks at the recommendations as a whole, they can more easily tell the company story. Including only governance without risk management paints an incomplete picture, for example, and the reverse is also true. When reporting, it’s best to aim for disclosures from each core area to give a holistic perspective.

2. Conduct Scenario Analysis

Scenario analysis, a research-based planning tool with a proven history of usefulness, can also help enhance perspective. Organizations can choose from two versions of scenario analysis, exploratory and normative. While exploratory helps leaders envision many possible future outcomes, normative allows planning for a specific set of circumstances in a future that’s desired.

Scenario analysis remains a challenge for companies attempting to participate in TCFD reporting. Obstacles include:

    • Difficulty developing scenarios that are both relevant and decision-useful for businesses
    • Challenges in quantifying the climate-related risks, opportunities, and financial impact
    • Lack of available data
    • Hesitance to fully disclose the results of these types of analyses because of the confidential information involved

The challenges seem daunting, and yet, comprehensive scenario analysis remains a powerful resource and best practice. It’s important to remember an organization can start with specific locations or asset classes and expand with time.

3. Recognize the Significance of Resilience of Organizational Strategy

While scenario analysis is a critical element of an organizational assessment, the TCFD Good Practice Handbook also reminds supporters to take the analysis a step further and discuss their organization’s resilience strategy in various scenarios. Because the ultimate aim is resiliency in the face of a variety of situations, best practices also incorporate this critical piece.

4. Define a Specific Timetable

Best practices in strategy disclosures require identifying short-, medium-, and long-term risks and opportunities, pinpointing a specific time period for each. Short-term may equate to the 2020s and 2030s for example, while medium-term represents the 2050s. A long-term view could be as far out as the 2090s. Each time frame will involve unique risks, so strategizing with specific dates in mind provides more accurate reporting.

5. Look at Both the Physical and Transition Risks

Increased accuracy also results when scenario analysis incorporates different projections for GHG. Doing so helps companies assess both the physical risks they face— disruptions in supply chains and other unplanned changes—as well as the transition risks—the impact of transitioning to a low-carbon future.

6. Make as Many of the Recommended Disclosures as Possible

While understanding of these reporting practices is growing, the TCFD Good Practice Handbook acknowledges the challenges of full disclosure but highly encourages companies to be transparent.


“We have not found any one company with full TCFD disclosures, which we note reflects the current stage of understanding and reporting practice. However, companies should be encouraged to make as many of the 11 recommended disclosures as they can to tell their story of how they are effectively managing climate-related risks and opportunities.”

- TCFD Good Practice Handbook

TCFD Overview

The work and recommendations of the Task Force will help firms measure and manage the risks they face from climate change and will help inform investors and prepare financial markets for what is to come.

To learn more on the Task Force on Climate-related Financial Disclosures, click here.

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