'Significant' work still to be done despite growing support - TCFD

The Task Force on Climate-related Financial Disclosures (TCFD) has warned that "significant work" remains to be done to 'mainstream' the consideration of climate-related issues in financial decision-making, despite growing global support.

The TCFD's 2021 Status Report confirmed that an additional 1,000 organisations have pledged support for the TCFD recommendations in the past year, totalling over 2,600 supporters globally, a 70 per cent increase on last year.

TCFD supporters span 89 countries and jurisdictions and nearly all sectors of the economy, with a combined market capitalisation of over $25trn, a 99 per cent increase since last year.

The UK was identified as one of eight countries or collectives to have introduced requirements for domestic organisations to report in alignment with the TCFD recommendations, alongside Brazil, the EU, Hong Kong, Japan, New Zealand, Singapore, and Switzerland.

However, despite the growing support, the group warned that difficulties remain, with "significant" work still to do to 'mainstream' the consideration of climate-related issues within financial decision-making.

Taskforce chair, Michael Bloomberg, commented: “The TCFD has had an exceptional year rallying global support for consistent and transparent climate risk reporting. Since our last report in September 2020, public- and private-sector support for the TCFD recommendations has accelerated rapidly.

“The momentum we have built is helping to ensure that organisations throughout the global economy understand and appreciate the role of climate change as a financial risk around the world.

“Our recent review of more than 1,600 companies found the greatest-ever growth in disclosures aligned with the TCFD recommendations.

“At the same time, companies continue to struggle to quantify the impacts of climate change, and to source the data they need to fully assess the threats of a changing climate.

“Our efforts to increase and improve these disclosures are only growing more important. Markets are increasingly looking to channel funds to sustainable and resilient investments, and it is critical that climate reporting requirements are standardized across jurisdictions to help investors and consumers make decisions."

Two of the most challenging areas of implementation, according to TCFD survey respondents, related to the taskforce's recommendations on strategy, and metrics and targets.

However, the taskforce has undertaken work to address these challenges, publishing two supplemental documents alongside the status report: an updated version of the Implementing the Recommendations of the TCFD report and guidance to assist companies with disclosure of climate-related metrics, targets and transition plans.

Both of these documents were informed by public consultations, which received over 240 responses and looked at issues on forward-looking financial sector metrics.

The taskforce will prepare a further status report for the Financial Stability Board in September 2022.

Commenting on the report, Lombard Odier senior managing partner, Hubert Keller, added: “We strongly support the findings of the TCFD’s Portfolio Alignment Team (PAT), that forward-looking ESG metrics are required if we are to properly assess whether companies are putting in place appropriate strategies to reduce their carbon footprints.

“The PAT report provides a thorough and invaluable reference for the proper design and construction of alignment methodologies and will accelerate the mainstream adoption of such metrics by the market at large.

“As an industry, understanding which companies within high-emitting sectors are emerging as climate leaders, rather than climate laggards, is a critical part of the transition, as it is in these high-emitting sectors where the most significant emissions reductions can be achieved.

“As such, implementing forward-looking approaches such as Implied Temperature Rise (ITR) metrics is fundamental to our ability to successfully navigate the climate transition."

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