February 18, 2021

“In January of last year, I wrote that climate risk is investment risk. I said then that as markets started to price climate risk into the value of securities, it would spark a fundamental reallocation of capital. Then the pandemic took hold – and in March, the conventional wisdom was the crisis would divert attention from climate. But just the opposite took place, and the reallocation of capital accelerated even faster than I anticipated.” – Larry Fink, Chairman and CEO of BlackRock in his 2021 Letter to CEOs


Investors, corporations and governments are uniting around the race to net zero at a phenomenal pace. As these organizations look for ways in which to assess and disclose their resilience to climate change, the Task Force on Climate-related Financial Disclosures (TCFD) has emerged as the gold standard for climate disclosures.

Published in 2017, the TCFD recommendations provide a framework to help investors assess the resilience of firms and assets in the face of different climate impacts and futures. 2020 was a turning point for the recommendations, with the following regulatory and corporate updates:

  • New Zealand became the first country in the world to make TCFD disclosures mandatory. By 2023, a majority of entities, including publicly listed companies, insurers, banks will have to publish TCFD disclosures, on a ‘comply or explain’ basis.
  • The United Kingdom followed suit, introducing mandatory climate-related financial disclosure aligned to the TCFD, beginning with certain financial institutions and listed companies. By 2023, all listed commercial companies, nearly all banks, insurers, asset managers, nearly three quarters of occupational pension schemes and half of all UK-registered large private companies will have to publish TCFD disclosures.
  • The Canadian government required large employers to provide TCFD-aligned disclosures in order to apply for COVID-19 relief funding.
  • Larry Fink, CEO of BlackRock, the world’s largest asset manager, used his annual Letter to CEOs to call for Sustainability Accounting Standards Board (SASB) and TCFD disclosure from companies in which they invest.
  • The CEOs of eight of Canada’s largest pension plan investment managers, the Maple 8, published a statement calling for Sustainability Accounting Standards Board (SASB) and TCFD disclosure.
  • The Commodity Futures Trading Commission (CFTC) in the U.S. authored a report that found that climate change poses a risk to the U.S. financial system. It recommended that the Securities and Exchange Commission strengthen requirements to disclose climate-related risks.
  • By May 2020, nearly 60% of the world’s 100 largest public companies supported the TCFD and/or reported in line with the TCFD recommendations, although there is room for improvement in the level of disclosure.

Momentum is unlikely to slow in 2021, especially in light of a new U.S. federal administration that has made addressing climate change an urgent priority.

With TCFD enthusiasm reaching new heights, you may be asking yourself, “Is this right for my company?” The short answer is “yes”.

Regulators are moving to align emerging climate disclosure requirements to the TCFD, and an increasing number of institutional investors have demanded that firms align their disclosure to it. This signals market awareness and demand for climate-related financial disclosures, meaning TCFD disclosures may soon become ‘table stakes’ or a given for large corporations.

Why? Because according to Mark Carney, former Governor of the Bank of Canada and Governor of the Bank of England, and current United Nations (UN) Special Envoy on Climate Action and Finance, the TCFD “represents the best views of the private sector of what is decision useful, capturing the opinions of both the companies that must access finance and of the providers of capital from across the financial system.”


We know a first-time TCFD report can be daunting. To help your organization succeed, we’ve prepared the following top five TCFD tips:

1. Use the TCFD as a Framework to Tell Your Sustainability Story in a Common Language

TCFD disclosures are one way the private sector, regulators, and other key stakeholders can move towards “speaking the same language” when it comes to climate-related risks and opportunities. The climate disclosure landscape is beginning to coalesce around the vocabulary used by the TCFD for climate-related information. For example, reporting frameworks like CDP, UN Principles for Responsible Investing (PRI), Sustainability Accounting Standards Board (SASB), and Global Reporting Initiative (GRI) are mapping their climate-related disclosures to align with TCFD recommendations.

You can use the TCFD recommendations (a) as a conversation starter with your investors and internal management around business strategy and financial planning, (b) to connect the dots between governance, business strategy, risk management and operational performance on climate-related issues, and (c) as a jumping-off point to examine how your business will be resilient in the face of climate-related uncertainties.


2. Just Get Started, Then Improve Over Time

Corporations and investors around the world representing over $12.6 trillion in market capitalization have expressed their support for the TCFD, and this support is will continue to grow. Disclosure that is consistent with TCFD recommendations is an iterative process that companies will improve and perfect over time. Getting started signals your intention to be transparent and provide stakeholders with relevant information. It also allows you to build internal capacity for enhancing governance and management of climate-related issues. For a first disclosure, the key is to demonstrate to stakeholders that your company is asking the tough questions.


3. Every Industry is Different

Every company is exposed to climate-related risk to some extent, but the financial impacts of climate-related risks and the opportunities differ by sector. The TCFD provides supplemental guidance for financial institutions (banks, insurers, asset owners, asset managers) and non-financial sectors (energy, transportation, materials and buildings, and agriculture, food and forestry).

Disclosure aligned with TCFD recommendations requires a thorough understanding of the specific climate risks and opportunities that are relevant to your company and industry, whether your organization is in energy and utilities, mining, financial services, or even if you are a municipality. Focus on macro climate trends and how your company is responding.


4. Both the “What” and the “How” of Disclosure Matter

A best-in-class TCFD disclosure includes relevant climate-related information and is clearly structured across four categories: governance, strategy, risk management and metrics and targets. The TCFD recommends that disclosures be included in annual financial filings.

For now, implementation of the recommendations varies in practice. Some TCFD disclosures are published in stand-alone reports, others are integrated into sustainability reporting. Best practice is still emerging and is unlikely to be set for the next few reporting cycles. The key is to align as closely to the recommended structure and disclose in a way that makes sense for your organization and is transparent for stakeholders. And remember, this is just as much about climate-related risk management as it is about identifying climate-related opportunities for your organization. Take the long view by setting metrics and targets. If you are undertaking climate scenario analysis for the first time, start with known scenarios and a qualitative assessment, adding more rigour and financial quantification over time.


5. TCFD Disclosure is One Part of a Larger Toolbox for Managing Climate Risks and Opportunities

Preparing a TCFD disclosure requires engaging numerous internal stakeholders across different parts of the business. The TCFD provides a strong structure for your organization to think about the work you have done and plan to do related to climate change. It also lends itself well to iterative conversations and long-term thinking around strategy and financial planning related to climate change.

TCFD disclosure is likely just one component of the work your organization has or will undertake in the face of climate-related risks and opportunities. It is one step on your larger journey, providing you with the tools to think about and discuss long-term changes that will impact your organization.


For a deep dive into the TCFD Recommendations, join us at GLOBE Capital for TCFD: Beyond Disclosure to Core Business Strategy. Register today at capital.globeseries.com.

Jessica Butts is a Senior Director and Emile Lavergne and Puninda Thind are Consultants with The Delphi Group. For more information on TCFD disclosure and/or to grow your organization’s climate leadership, feel free to reach out to any one of them directly: Jessica (jboyle@delphi.ca) | Emile (elavergne@delphi.ca) | Puninda (pthind@delphi.ca).

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