A summary: Task Force on Climate-related Financial Disclosures (TCFD)

Sumday Team
July 18, 2023
5 minutes

The Task Force on Climate-related Financial Disclosures (TCFD) recommends voluntary climate-related financial disclosures that are consistent, comparable, and reliable. The key focus is on governance, strategy, risk management, and metrics and targets. Find out more from our introductory blog post on TCFD.

Who does it apply to:

The TCFD framework is designed for all organisations, regardless of their size, sector, or location. However, it is particularly relevant for publicly traded companies and financial institutions.

Although the TCFD framework itself is voluntary, many jurisdictions are using the TCFD framework as the basis for their reporting requirements, meaning that reporting in accordance with the TCFD could still be mandatory for some organisations.

Several countries have already mandated reporting in line with the TCFD framework

As of June 2023, the following countries have mandated or are planning to mandate climate related disclosures that are in line with the TCFD framework:

  • United Kingdom
  • New Zealand
  • Singapore
  • Japan
  • Switzerland
  • European Union (see CSRD section)
  • Australia
  • Canada
  • US (see SEC section)

However, even in countries where TCFD reporting is not mandated, many companies voluntarily disclose TCFD-aligned information in their sustainability reports or financial filings.

What are the sections relevant to carbon accounting:

The TCFD framework recommends that companies disclose information on their governance, strategy, risk management, and metrics and targets related to climate-related risks and opportunities, which includes disclosing their climate impact in terms of the Greenhouse Gas inventory.

The most relevant section for carbon accounting is the recommended disclosure b) under the metrics and targets pillar. This section recommends that organisations disclose their Scope 1, 2, and 3 GHG emissions, calculated in accordance with the GHG Protocol methodology.

The framework also recommends that where appropriate organisations should report on GHG efficiency ratios. For most organisations this will include revenue based emissions intensity as well as production metrics relevant to their specific industry (e.g. tonnes of product produced or billable client hours).

The TCFD also includes sector specific GHG reporting guidance. For insurance, investing, and asset management, the TCFD recommends that organisations align their reporting with the specific methodology outlined under Partnership for Carbon Accounting Financials (PCAF). Currently there is no specific supplementary GHG reporting guidance for Non-Financial Groups.

Extract from TCFD Framework

What are the disclosure requirements outside of carbon accounting that sumday advisors may be able to support:

The TCFD framework has three remaining pillars, which recommend that companies disclose information about their governance, strategy, and risk management related to climate-related risks and opportunities. These sections build on carbon accounting as a foundation.

The recommendations cover how the company identifies and assesses climate-related risks, the resilience of the company's strategy to different climate-related scenarios, including a 2°C or lower scenario, as well as the measures it is taking to manage and mitigate those risks.

Extract from TCFD Framework

Key takeaways for advisors:

Sumday can assist advisors in preparing GHG inventories in line with the requirements outlined under the TCFD. In addition our learning materials provide advisors with the knowledge to interpret the outputs from their clients GHG Inventory to input into the broader reporting on risk, strategy and governance pillars under the TCFD.

As clients move towards regular reporting and target setting Sumday will enable organisations to track and report on their progress relative to these targets.

Disclosure examples:

In addition to the above examples, TCFD provides a register of organisations reporting against elements of the TCFD Framework which can be found on the organisations Report Database and TCFD Knowledge Hub's example disclosures.