Publication of the 2021 status report by the industry-led Task Force on Climate-related Financial Disclosures (TCFD) has been launched by the Financial Stability Board (FSB). The report sets out further progress in TCFD-aligned disclosures by firms.
The latest status report clearly identifies that disclosure of climate-related financial information aligned with the TCFD recommendations has skyrocketed over the past year, leading to nine percentage points in 2020 compared to a mere four percentage points in 2019. Thus, over 50% of firms disclosed their climate-related risks and opportunities. More than 2,600 organisations have expressed their backing for the TCFD recommendations, a rise of 33% since the 2020 status report. Notwithstanding, the report highlights that significant further progress is still required.
The TCFD has also published two additional supporting documents for decision-useful disclosures. Guidance on Metrics, Targets, and Transition Plans to prepare report writers in disclosing decision-useful information, not to mention linking those disclosures with estimates of financial impacts; and updates to the implementation guidance on its Recommendations initially published in 2017.
Next steps for TCFD
The TCFD Recommendations are widely supported on the basis for climate-related reporting. Not only due to voluntary private-sector adoption, but more recently through jurisdictional initiatives to make such disclosures mandatory or promote voluntary implementation, as well as through the IFRS Foundation’s endeavours to develop a baseline global sustainability reporting standard, constructed from the TCFD framework including, the alliance of sustainability standard setters. The FSB calls for the TCFD prepare itself in order to respond to requests for technical advice relation to the TCFD recommendations that may pop up when designing such initiatives.
The FSB welcomes the ongoing progress made by the IFRS Foundation is developing a global sustainability reporting standard, beginning with climate. As the IFRS Foundation advances its work, there is an essential, continuing role for the TCFD in monitoring and reporting on the application of recommendations in the period until a global baseline standard is agreed and the implementation of that standard across jurisdictions starts to be monitored. Thus, the FSB asks the TCFD to maintain its work to promote and monitor progress made on these points, and release a further status report in September 2022, covering 2021. Such monitoring will support the FSB’s monitoring of jurisdictions’ initiatives to ensure that TCFD-based disclosures are mandatory or to promote their voluntary implementation, and will promote disclosures that, by being TCFD-aligned, will be using a common basis with the planned global baseline standard.
FSB Chair Randal K. Quarles said: “Consistent and comparable disclosures are foundational for enabling accurate risk assessment. The TCFD recommendations have become widely supported by the private and official sectors as the basis for climate-related disclosures, and this year’s report shows further momentum but also where disclosure gaps remain. As the IFRS Foundation continue to develop a global sustainability reporting standard, working with an alliance of standard-setters, I am pleased that they will be able to draw from the strong work of the TCFD.”
Michael R. Bloomberg, Chair of the Task Force and Founder of Bloomberg LP and Bloomberg Philanthropies said: “When companies disclose clear, consistent, and accurate information on the risks they face from climate change, investors and business leaders can make more informed and sustainable financial decisions. That strengthens our global economy, improves health, and helps address the climate crisis. The Task Force has had an exceptional year in rallying global support for climate risk reporting – but we still have a long way to go. As governments and businesses around the world work to accelerate the transition to a clean energy economy, they should continue to draw on the TCFD recommendations as a critical tool in their efforts.”