The Impact of the Taskforce for Climate-Related Financial Disclosures (TCFD) 

How the TCFD Increased Consistency in Climate-Related Disclosures 

The Taskforce for Climate-Related Disclosures (TCFD) was created by the Financial Stability Board (FSB) in 2015. It has recently issued its final report – and its role will be taken over by the International Sustainability Standards Board (ISSB) in 2024.  

During its tenure, the TCFD has achieved myriad successes. It has made significant strides in achieving consistency and comparability in climate-based disclosures and reporting. It has also become influential across the world, with the guidelines being integrated into reporting standards by governments, powerful organisations, regulatory bodies, and corporates.  

Why was the TCFD established? 

The climate change emergency creates many challenges for businesses. It poses serious risks to the global economy and many sectors within it. The result is that climate change is a critical consideration for investors and business owners.  

The performance of the real estate sector and all businesses operating within the built environment is inextricably entwined in climate change considerations. To build climate resilience and ensure financial stability while making changes for the environment requires a unified approach. The TCFD aimed to standardise businesses’ disclosures on how they are affected by, adapt and respond to climate change. 

These disclosure protocols and processes will also provide transparency and accessibility of information to guide low-carbon and sustainable change.  

The built environment is extremely energy-intensive – accounting for around 40% of global emissions. It is simultaneously vulnerable – to the effects of climate change, as well as the urgency to effect sustainability-driven changes. Public and regulatory pressure to do so make climate risk and opportunity a keen focal point for investors and other stakeholders. 

Using the TCFD framework, transparency around meaningful metrics guide climate-related decisions and allow stakeholders to make informed, strategic decisions around climate risk and opportunity.  

The TCFD was created to create standardised climate-related disclosures and reporting in this regard. This supports the ability of investors, lenders, and other stakeholders to assess and manage risk and optimise capital-allocation decisions. Paramount in the achievement of its task is widespread adoption and transparency. 

What are the four pillars of the TCFD?  

The TCFD framework is predicated on four pillars and 11 recommendations. These pillars are governance, strategy, risk management, metrics and targets. 

• Governance: in response to climate-related risks and opportunities. 
• Strategy: including both the real and possible impacts of climate risks and opportunities. 

• Risk management: encompassing the means by which risks and opportunities are identified, assessed, and managed. 
• Metrics and targets: for the assessment and ongoing management of climate-related risks and opportunities. 

The impact of TCFD 

The final TCFD report was published in September 2023 – and their work will come to an end at the end of the year. While the work of the body has made significant strides around financial disclosures around climate change, more needs to be done to fully achieve the aims of the organisation. Some of the statistics and insights that have come from this final report include the following: 

• 97 of the 100 largest companies in the world have pledged support for TCFD principles.  
• Around 6 in 10 of the world’s listed companies are reporting on five or more TCFD recommendations.  
• TCFD principles have been implemented or proposed across 19 jurisdictions around the world. 
• More than 80% of the largest asset managers and over 50% of the largest asset owners report on at least one of the TCFD recommendations. 
• More than 4800 organisations endorse the TCFD framework. 
• Only 4% of companies reported in line with all 11 recommendations. 
• Reporting in financial filings was found to be limited, with climate-related reporting found to be more likely to be reported in sustainability and annual reports. 
• TCFD reporting remains largely voluntary. This is not the case in the U.K., where some large firms are required to report in alignment with TCFD principles. 

In handing over the reins to the ISSB, it is clear that the TCFD recommendations are a foundation for financial disclosures today and into the future. These principles have been integrated into many disclosure regimes around the world. The low uptake of listed companies reporting on all 11 recommendations is notable. Reporting quality has also been an ongoing challenge.  

Regulation around climate-related financial disclosures must evolve around the shifting realities of climate change and its effect on economies and businesses.  

How smart technologies simplify climate-related disclosures and reporting 

It has become clear that these disclosures will become ubiquitous for real estate investment trusts (REITs) and business owners as we navigate climate change into the future. One of the challenges to the framework today is the provision of high-quality, accurate, and reliable data by investee companies.  

Scalable smart technologies are powerful digital tools for simplified, transparent reporting and strategic decision-making. By continuously collecting data around energy consumption, for example, buildings and businesses are positioned to accurately understand their usage. In doing so, they are empowered to compile net-zero strategies that are guided by data.  

According to UNEP, scenario analysis has become an essential tool in assessing climate-related risks – and the data collected around actual operations will undoubtedly become the building blocks of any climate-related analysis.  

The TCFD provided seven guidelines on how to achieve effective disclosure. These were: 

• Relevant 
• Specific and complete 
• Clear, balanced, and understandable 
• Consistent over time 
• Comparable across the sector, industry, or portfolio 
• Reliable, verifiable, and objective 
• Timely 

The collection, storage, analysis, and reporting on real-time data collected over time within a building or business achieve effective disclosure to the highest level. These digital solutions allow for climate-related risks and opportunities to be optimally identified, monitored, and addressed. It also supports effective benchmarking, physical and transitional risk analysis, and quantification.  

Smart tools for simplified financial disclosure reporting 

Contact Smarter Technologies Group to find out about our customisable smart solutions for your organisation. Our smart building and energy solutions provide real-time data insights on every element of your operations for complete transparency and accountability on environmental metrics. This underpins effective environmental strategy, meaningful net-zero endeavours, and simplified reporting for evolving regulation. Contact us today.