Climate Task Force – first report out now

The Task Force on Climate-related Financial Disclosures (TCFD) has published its first report.

The task force was set up by the Financial Stability Board (FSB) to develop voluntary, consistent climate-related financial risk disclosures to enhance market understanding of possible linkages between climate-related risks/opportunities and financial impacts in order to aid the economic decision-making of capital markets participants including lenders, insurers, investors and other stakeholders.

On 4 December 2015, the Financial Stability Board established the Task Force on Climate-Related Financial Disclosures (TCFD) with Michael Bloomberg announced as Chair.

The first plenary meeting on 8-9 February in London included public presentations by key NGO stakeholders and a closed-door working session for Task Force members to discuss objectives, the scope, and work streams.

The second plenary meeting on 8-9 March in Singapore included a public session with Task Force representatives and external stakeholders from industry, finance, government, and not-for-profits throughout Asia. In its closed-door working session, Task Force members focused on finalizing the Phase I Report and next steps for Phase II.

On 31 March 2016, Phase I of the report was presented to FSB members in Tokyo by Mary Schapiro, Wim Bartels (KPMG), and Masaaki Nagamura (Tokio Marine).

In a first phase, the TCFD has conducted a high-level review of the existing landscape of climate-related disclosures — including current voluntary and mandatory climate-related disclosure regimes — to identify commonalities, gaps, and areas for improvement and highlights these in its first report.

The report also defines the scope and objectives of its work for the second phase where the TCFD will target climate-related financial disclosures pertaining to near-, medium- , and long-term physical and nonphysical impacts faced by both non-financial companies and the financial sector.

Finally, the task force has identified seven fundamental principles that are critical for an effective regime for climate-related financial disclosure and that will underpin the TCFD’s recommendations to be developed in phase two for enhancing climate-related disclosures and providing an enduring framework to:

  • present relevant information;
  • be specific and complete;
  • be clear, balanced, and understandable;
  • be consistent over time;
  • be comparable among companies within a sector, industry, or portfolio;
  • be reliable, verifiable, and objective;
  • be provided on a timely basis.

“Investors are increasingly seeing the correlation between climate change and potential financial risks,” noted Martin Skancke, PRI Board Chair. “Ensuring the reporting is done in a way that is relevant and useful for investors and that the proper incentives are in place for investors to incorporate this information into their investment decisions is key to the success of the Task Force initiatives. There will also be active consultations over the coming months, to which the PRI would be happy to contribute.”

In its second phase, The Task Force will develop recommendations for voluntary disclosures of climate-related risks and opportunities located in the mainstream financial filings of non financial and financial companies that are listed and/or issuers of public securities. In devising recommendations for disclosures by the financial sector, the Task Force also seeks to ensure all relevant parts of the credit and investment chain are covered.

Subsequent plenary meetings of the Task Force will be held on 4-5 May (Washington, DC), 12-13 July (New York), 13-14 September (Paris), and 15-16 November (London).

There are preliminary plans to update the FSB in the fall of 2016 and deliver the Phase II report by end-December.

An executive summary of the report is available along with the full report.