The Task Force on Climate-related Financial Disclosures (TCFD) was established to design recommendations for consistent disclosures that would help financial market participants understand their climate-related risks. This report contains TCFD’s final recommendations. Critical to the success of these recommendations is their widespread adoption by organisations in both the financial and non-financial sectors to improve the availability and quality of climate-related disclosures.

The report is categorised into four sections, including:

• A discussion of climate-related risks, opportunities, and financial impacts.
• Recommendations and guidance for climate-related financial disclosures.
• A description of how and why an organisation should undertake scenario analysis and how it can be used for climate-related issues.
• Key issues considered in the report and areas for further work.

In order to develop the recommendations, TCFD engaged in consultation with users and preparers of disclosures and drew upon existing climate-related disclosure regimes. It structured its recommendations around four thematic areas that represent core elements of how organisations operate – governance, strategy, risk management, and metrics and targets.

TCFD recommends that governance disclosures describe:

• the board’s oversight of climate-related risks and opportunities; and
• management’s role in assessing and managing climate-related risks and opportunities.

TCFD recommends that strategy disclosures describe:

• the climate-related risks and opportunities the organisation has identified over the short, medium, and long term;
• the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning; and
• the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.

TCFD recommends that risk management disclosures describe:

• the organisation’s processes for identifying and assessing climate-related risks;
• the organisation’s processes for managing climate-related risks; and
• how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management.

TCFD recommends that disclosures relating to metrics and targets disclose:

• the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process;
• Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas emissions, and the related risks; and
• a description of the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.

In addition to these thematic disclosures, the report recommends organisations use scenario analysis to assess and disclose potential business, strategic, and financial implications of climate-related risks and opportunities. Organisations are encouraged to use a 2°C or lower scenario in addition to two or three other scenarios relevant to their circumstances.

Alongside the recommendations sit guidance to support all organisations in developing climate-related financial disclosures, and additional supplementary guidance for specific sectors. These sectors include the financial sector and non-financial industries potentially most affected by climate change and the transition to a lower-carbon economy (energy, materials and buildings, transportation, and agriculture, food and forest products).

1. This report identifies information needed by investors, lenders, and insurance underwriters to appropriately assess and price climate-related risks and opportunities. Without the right information, investors and other stakeholders may incorrectly price or value assets, leading to a misallocation of capital.
2. Climate risk is largely misunderstood. The large-scale and long-term nature of the problem makes climate change uniquely challenging and many organisations incorrectly perceive the implications to be long term and therefore not necessarily relevant to decisions made today.
3. TCFD divided climate-related risks into two major categories: (1) risks related to the transition to a lower-carbon economy, including policy, litigation, technology, market, and reputation risk; and (2) risks related to the physical impacts of climate change, these being acute risk driven by extreme weather events, and chronic risk relating to longer-term shifts in climate patterns.
4. Efforts to mitigate and adapt to climate change produce opportunities for organisations. For example, reducing operating costs by improving resource efficiency; shifting energy usage toward low emission sources; developing low-emission products and services; seeking opportunities in new markets or types of assets to diversity activities; and building climate resilience to better manage risks and seize opportunities.
5. In order to make more informed financial decisions, investors, lenders, and insurance underwriters need to understand how climate-related risks and opportunities are likely to impact an organisation’s future financial position as reflected in its income statement, cash flow statement, and balance sheet. Organisations are encouraged to undertake both historical and forward-looking analyses when considering the potential financial impacts of climate change.
6. To promote more informed investing, lending and insurance underwriting decisions, TCFD recommends that all organisations with public debt or equity implement its recommendations. Asset managers and asset owners should also implement these recommendations so that their clients and beneficiaries may better understand the performance of their assets, consider the risks of their investments and make more informed investment choices.
7. Climate-related financial disclosures should be made in mainstream annual financial filings, and in accordance with the national disclosure requirements for each organisation.
8. All organisations exposed to climate-related risks should consider (1) using scenario analysis to help inform their strategic and financial planning processes; and (2) disclosing how resilient their strategies are to a range of plausible climate-related scenarios. For many organisations, this would be a largely qualitative exercise.
9. TCFD expects that reporting of climate-related risks and opportunities will evolve over time as investors and other organisations continue to contribute to the quality and consistency of the information disclosed.
10. The success of TCFD's recommendations depends on widespread adoption by organisations in the financial and non-financial sectors. Through widespread adoption, financial risks and opportunities related to climate change will become a natural part of organisations’ risk management and strategic planning processes.