Task Force on Climate Related Financial Disclosures

A changing world 

The climate of our world is changing. We know that hazards created by climate change present a significant risk both to tangible assets and to business supply chains. The financial markets and investors need clear information on how exposed businesses in the UK are to climate risk. However, historically there has been a lack of clear and comparable data in this area. To assist with this The Task Force for Climate Related Disclosures (TCFD) was set up in 2015 by the Financial Stability Board with the aim of improving climate related engagement between investors and the financial markets. While TCFD was initially voluntary it has become part of the regulatory framework in many countries. 

TCFD in the UK

In the UK the government has adopted TCFD as part of its roadmap to getting to net zero by 2050. From 6 April 2022 it became mandatory for certain organisations (including banks, insurance companies and companies/LLPs with over 500 employees and a turnover of more than £500 million) to provide climate related financial disclosures in line with TCFD recommendations on an annual basis. TCFD provides UK companies with a uniform way to assess how a changing climate may impact their business model and strategy. While TCFD currently only applies to select large organisations it is likely that its reach will be significantly expanded over the next few years.

The goal of TCFD is to ensure that climate change is at the heart of every company's strategy and operations.

Companies are required to disclose against four key areas:

  • Governance
  • Strategy
  • Risk management
  • Metrics and targets

TCFD disclosures require a company to consider how it assesses climate related risks and opportunities. Disclosures will include:

  • Principal climate-related risks and opportunities
  • Time periods by reference to which those risks and opportunities are assessed
  • Processes for identifying and integrating climate-related risks into the risk management process
  • Actual and potential impacts of climate-related risks on the company’s business model and strategy

The goal of TCFD is to ensure that climate change is at the heart of every company's strategy and operations. 

Challenges

Many organisations that are not currently captured by TCFD are choosing to voluntarily make disclosures. We know that funders are keen on obtaining climate related data from those companies they invest in. However, there are challenges to implementation of TCFD. It is accepted that many companies are ill prepared to provide climate data. There is a lack of internal expertise in many organisations. After all the disclosure exercise will only be as good as the quality of the exercise undertaken. The cost of complying with TCFD may also be high depending on if the organisation has the data collection systems in place to collect this information. Embedding climate risk into business strategy may also require real organisational change. It’s a change that needs to happen from the top down and isn't something that can happen overnight.

How can we help

Our highly skilled teams of specialists in areas such as green, social and sustainable finance, impact investment and blended finance, governance, employment and corporate can assist you in considering what organisational changes need to be made in order for you to move towards making climate related financial disclosures.

Strategic review

Understanding the way your business operates is the key to understanding which areas of your business may be exposed to climate risk. We will get to know you and your team and work with you to assess what operational changes need to be made and where the risks lay.

What is involved

Our experts will work with you to help you assess your readiness to make climate related disclosures. We can assist with setting and reviewing key performance indicators in areas such as environmental, social and governance. You know your business best and we can help shape the metrics that will work for you. We can help with reviewing/drafting organisational policies and governance arrangements. We can assist with procurement advice re supply chains. We can also provide training on areas of interest to your executive team/board members.

What it will help you to achieve

Funders are already requiring that their borrowers make climate related financial disclosures in order to obtain funding. Companies that do not make such disclosures may find themselves left behind. But more than that understanding the climate related risks inherent in your organisation will make for a more resilient company attractive to a wider variety of stakeholders.

Strategic review

Understanding the way your business operates is the key to understanding which areas of your business may be exposed to climate risk. We will get to know you and your team and work with you to assess what operational changes need to be made and where the risks lay.

What is involved

Our experts will work with you to help you assess your readiness to make climate related disclosures. We can assist with setting and reviewing key performance indicators in areas such as environmental, social and governance. You know your business best and we can help shape the metrics that will work for you. We can help with reviewing/drafting organisational policies and governance arrangements. We can assist with procurement advice re supply chains. We can also provide training on areas of interest to your executive team/board members.

What it will help you to achieve

Funders are already requiring that their borrowers make climate related financial disclosures in order to obtain funding. Companies that do not make such disclosures may find themselves left behind. But more than that understanding the climate related risks inherent in your organisation will make for a more resilient company attractive to a wider variety of stakeholders.