The TCFD a year on… has the climate disclosure landscape changed?

26 September 2018

As the TCFD publishes its Status Report in New York today, Stephanie Chang considers how companies are enhancing their disclosures of climate risks and how investors are responding.

Just over a year ago, the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) launched its recommendations.  This provides a framework setting out how companies should assess and report on climate-related risks and opportunities. It calls for a shift in thinking: recommending that companies evaluate the financial implications of climate change to their business. These could be  from the physical impacts of a warming world with more extreme weather or from the transitional impacts as regulation and technology innovation accelerate the low carbon transition.

Investors have largely embraced the recommendations. They want companies to disclose more than their carbon footprint  (indeed, it is even debatable whether a carbon footprint answers the right questions). Investors want to know how resilient a company’s business model and operations will be in the face of a low carbon transition or extreme weather events. Major institutional investors are taking action. For example, Legal & General Investment Management recently divested from eight companies across its Future World holdings for persistent inaction to address climate action. Unlike the recent trend in divesting from fossil fuels, these companies spanned sectors as diverse as banks, supermarkets and autos.

Regulatory interest continues apace - the Financial Reporting Council recently released Guidance on what companies should put in their strategic reports, including under the new reporting requirements of Section 172 of the Companies Act1. Climate risks are specifically highlighted as an example of long term, systemic risks “which may have a material effect on the entity’s ability to generate and preserve value in the long term”. The Bank of England’s Prudential Regulatory Authority is expected to follow up its 2015 review of the impact of climate change on the insurance sector with a report assessing the banking sector this autumn.

The TCFD released its second report today which looks at the state of climate-related disclosures.  It shows that companies still have a long way to go. In our experience companies are beginning to understand and recognise climate-related issues. But there is still a reluctance to discuss (or sometimes even assess) its financial implications - the very information that is of most interest to investors and regulators. Research underpinning our latest review of corporate reporting by the FTSE350 found that 8% now include climate change in their principal risk disclosures.

So, more companies are gradually starting to get to grips with how climate change could impact them financially. The continued pressure from the TCFD, investors, regulators and others suggests that the time has come for many to look again at how this work is being reflected in their public reporting.


1 Section 172 of the Companies Act sets out a requirement for directors’ to perform their duties to promote the success of the company for the benefit of its members as a whole, taking into consideration: the long term consequences of their decisions, interests of their stakeholders, as well as the company’s impact on environment and community, amongst others.  See


Stephanie Chang | Assistant Director, Sustainability & Climate Change
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