Taskforce on Climate-related Financial Disclosure (TCFD)

What is the Taskforce on Climate-related Financial Disclosure (TCFD)?

The TCFD, put together by the Financial Stability Board, is designed to help companies effectively report on climate-related risks. Originally, it only applied to the financial sector.

4 themes, 7 principles

The TCFD is based on four themes and seven principles. The four themes contain 11 recommendations for reporting and decision-making. An important feature is that they are overarching, sequentially they become more concrete and tangible.

  • Governance: Describe governance policies related to climate-related risks and opportunities.
  • Strategy: Describe the actual and expected impacts of climate-related risks and opportunities in the short, medium and long term and their financial planning where material.
  • Risk management: Describe how climate-related risks are identified, assessed and managed.
  • Measurements & targets: Reported the measurements and targets used to estimate and manage climate-related risks and opportunities.

Besides recommendations, the TCFD is also based on seven principles. These principles are made to ensure high quality reporting. The seven principles are:

  1. Information is relevant;
  2. Information is specific and complete;
  3. Information is clear, balanced and understandable;
  4. Information is clear over time;
  5. Information is comparable between companies within the same sector, industry or portfolio;
  6. Information is reliable, verifiable and objective;
  7. Information is periodically available

Who does the TCFD apply to?

Only in the UK and New Zealand are the largest companies and financial institutions legally required to publish climate-related information. Other countries do not have this legal obligation, although the principles of TCFD are reflected in legislation (such as the CSRD), standards or frameworks.

Why is it important?

Companies that apply the TCFD framework are better able to factor climate change risks into their business strategy, for example when phasing out polluting activities and investing in sustainable alternatives. In addition, they show investors and shareholders that they take climate change seriously, which enhances their reputation.