This commentary is part of a series on emerging issues from Adaptation Leader.
The Taskforce on Climate-related Financial Disclosures (TCFD), an initiative of the influential Financial Stability Board (FSB), offers a framework for disclosure of climate risks. Despite the generally positive response and resulting buzz, in particular among advocates for climate action by businesses and those wanting to get on the bandwagon, the uptake of TCFD disclosures has been slower than its proponents had hoped.
The consultation on mandatory climate-related financial disclosures applies to LLPs, public and large private companies, and would require firms falling into these categories to report by 2022.
Originally set out in the government’s 2019 Green Finance Strategy, the government proposes that all listed companies and large asset owners should disclose in line with the Task Force on Climate-related Financial Disclosure (TCFD) guidelines.
The UK is pushing forward with plans to make TCFD reporting mandatory and wants the changes to come into effect in a little over a year.
In a consultation launched today, the Department for Business, Energy & Industrial Strategy says UK companies with more than 500 employees and traded on a regulated market should be forced to report in line with TCFD recommendations.
Key financial trade groups laid out a vision Feb. 18 for shifting the U.S. to a low-carbon economy, saying that the industry can play a leading role in limiting the risks that climate change poses to the system.
Regulators also appear poised to prod them in that direction. Several policymakers floated the possibility of new regulatory tools and required disclosures around climate-related risks at a climate conference hosted by the Institute of International Finance the same day.
BMO is a strong supporter of the Task Force on Climate-related Financial Disclosures (TCFD) and has been working to implement the TCFD’s recommendations and develop programs, approaches and disclosures that align with the TCFD framework. By joining PCAF and committing to measure and disclose the GHG emissions associated with its portfolio of loans and investments using PCAF methodologies, BMO is advancing its approach to climate-related risk and opportunity, playing its part to advance the ambition for a net zero world.
On 1 January a new listing rule came into effect (per final text of new LR 9.8.6R(8) as published by the FCA on 21 December 2020) requiring commercial companies with a UK premium listing to include a statement in their annual financial report setting out whether they have made disclosures therein that are consistent with the recommendations of the Taskforce for Climate-related Financial Disclosures (TCFD). Failure to do so must be accompanied by both an explanation and an action plan for providing such disclosures in future.
The FSB created the Task Force on Climate-related Financial Disclosures (TCFD) in 2015 to develop a set of voluntary disclosure recommendations for use by companies in providing decision-useful information to investors, lenders and insurance underwriters about the climate-related financial risks that companies face.
The FSB therefore welcomes the recommended approach by the Trustees of the IFRS Foundation to initially focus on standards for climate-related financial disclosures, as set out in the September 2020 IFRS Consultation Paper on Sustainability Reporting. The initial focus on climate-related information would be appropriate given the growing interest of investors in the topic for financial risk management and the importance of global consistency in the actions that are already beginning to be taken by national and regional authorities to develop requirements and guidance in this area.