Task Force on Climate-related Financial Disclosures (TCFD)

What is TCFD?

The Task Force on Climate-related Financial Disclosures (TCFD) was founded in 2015 by the Financial Stability Board (FSB).

The aim of TCFD is to provide uniform climate reporting that companies can use to provide information to lenders, insurers, investors and other stakeholders.

To achieve this objective the TCFD has developed a reporting framework based on a set of consistent disclosure recommendations for companies to provide transparency about their climate-related risk exposures to investors, lenders and insurance underwriters. Improving the quality, consistency and transparency of climate-related financial disclosures will allow economies to have the necessary information to better assess the impact and effects of an organisation on climate change. Around 2’300+ organisations worldwide, in the public and private sectors, as well as government entities, support the TCFD.

Why does it matter?

On 18 August 2021, the Federal Council decided on parameters for future mandatory climate reporting by Swiss companies. The Federal Department of Finance is to prepare a consultation draft by summer 2022.

The communication comprises the following:

• Public interest entities, banks and insurance companies with 500 or more employees, total assets of more than CHF 20 million and/or sales of more than CHF 40 million are required to report publicly on climate issues.
• Public reporting includes:
  • The financial risk that a company takes through climate-related activities
  • Disclosures on the impact the company's business activities have on climate or the environment

The double materiality approach applies and corresponds to the European Union approach

• Minimum requirements are intended to ensure that disclosures are meaningful, comparable and, where possible, forward-looking and scenario-based.
• The binding implementation of the TCFD recommendations is expected to commence from 2024 for the 2023 financial year through a separate executive order stemming from the Responsible Business Initiative counter-proposal.

Strategy

• Organisations should disclose historical and current climate-related financial impacts on their financial performance and position
  
• Organisations should disclose forward-looking climate-related financial impacts on their financial performance and position
  
• Organisations should release a transition plan component of its strategy if an organisation determines it has material climate-related transition risks, including if it operates in a jurisdiction with an emissions reduction commitment, has made an emission reduction commitment, or seeks to meet emissions reduction expectations from financial market participants

Metrics and Targets

• Organisations should disclose a set of cross-industry, climate-related metrics for the historical, current, and forward-looking period:

1. GHG emissions (Absolute Scope 1, Scope 2, and, if appropriate, Scope 3, emissions as well as carbon intensity if relevant),
2. Carbon price (external and shadow),
3. Proportion of assets exposed to physical risks, based on key categories of commonly accepted risks
4. Proportion of assets exposed to transition risks, based on key categories of commonly accepted risks
5. Proportion of product mix aligned towards climate-related opportunities, based on key categories of commonly accepted opportunities,
6. Amount of senior management remuneration impacted by climate considerations
7. Amount of expenditure or capital investment deployed towards climate risks and opportunities

• These metrics should not be subject to a materiality assessment
• Disclosure of Scope 1, Scope 2, and if appropriate,1 Scope 3 greenhouse gas emissions, and the related risks should not be subject to a materiality assessment
• Organisations should disclose climate-related targets for all cross-industry, climate-related metrics noted in recommended disclosure a) and should disclose key industry-specific metrics
• Targets should be informed by qualitative and/or quantitative scenario analysis and company forecasting, and should be quantified and sufficiently granular to enable tracking
• Targets should include interim targets and should be reported annually and updated regularly

How we can support?

• TCFD gap analysis
• Scenario analysis and internal carbon pricing
• Integrating climate risk into core risk management including processes and controls
• Defining ESG governance and associated accountability structure
• Sustainability strategy support
• TCFD reporting and assurance