IEMA, our governing institute, has issued new guidance to help with climate related financial disclosures [1]. The Taskforce on Climate-Related Financial Disclosures (TCFD) recommendations and resulting disclosures are proving to be hugely influential and take-up in disclosures is increasing.
The guide is extremely useful. As well as a reminder of what TCFD is all about, the guide also helps stakeholders interrogate published disclosures to really understand how organisations are tackling, and adapting to, climate change. Here we’ll share some snippets from the guide.
What is TCFD all about?
TCFD is relatively new and methods and consistency of reporting are still evolving. However, it is anticipated that organisations will start getting consistent in the next few years. Here is what is supposed to happen:
- Governance – a description of how an organisation’s board provides oversight to climate related risks and opportunities, and how the management team asses and manage those risks and opportunities
- Strategy – what impact do risks and opportunities have on the organisation’s strategy and how resilient the business strategy is under different climate change scenarios
- Risk management – detail on how climate related risks and opportunities are identified and how they are integrated into the overall risk management framework of the business
- Metrics – these will include Scopes 1, 2 and 3 emissions as well as targets
Advice on reading published disclosures
The guide has a very long list of things to consider and ask when reading an organisation’s disclosures. Here are a few things the guide points out:
Scenario analysis – the guide points out research which indicates that many financial organisations are underestimating the impact of climate change in their analyses. It also points out that, “Some organisations choose a scenario that most closely aligns to their own preferred future and then apply small variations to arrive at a set of scenarios. These are, however, unlikely to enable proper exploration of plausible alternative futures, acting rather to confirm/validate their existing approach”.
Greenwashing – readers should be alert to greenwashing where organisations are making claims about how well they are managing climate related risk and opportunities, compared to the actual reality of their actions. This might be a cherry-picked list of achievements, omitting key risks or failing to identify gaps and/or weaknesses.
Supply chain – there may be direct impacts of climate change on the business, but there are most likely impacts on the organisation’s supply chains which should be examined. The supply chain may be located in different countries which may be affected in different ways by climate change.
Metrics and targets – the degree to which GHG emissions have been independently assessed and assured as well as how relevant any targets are.
Biodiversity – there is a nod to the related Taskforce on Nature-related Financial Disclosures (TNFD). The guide highlights that climate change is not the only risk to an organisation’s business. Destruction of natural capital may well also have a material impact on any business.
At SHIFT we have produced hundreds of carbon footprint reports and we also produce risk metrics that organisations can use for their business planning. Please be in touch if you’d like to know more.
[1] https://www.iema.net/articles/iema-and-ifoa-publish-guide-to-climate-related-financial-disclosures
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