Implementing the recommendations of the TCFD

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  • Publication Date: June 1, 2017
  • Language: English
  • Geographic Area: Universal
  • Issuing Entity: TCFD
  • Application Scope: Others
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Abstract
Regulatory Extracts from this
The TCFD developed four widely adoptable recommendations that are supported by key climate related financial disclosures—referred to as recommended disclosures. In addition, there is guidance to support all organizations in developing disclosures consistent with the recommendations as well as supplemental guidance for specific sectors and industries.
Extracts
Recommendations
The Task Force believes disclosures related to its Governance and Risk Management recommendations directly address this need for context and should be included in financial filings.
  • Theme: Strategy (Business Model)
  • Text Nature Guidelines
  • General Topic: Climate risk
Strategy – Supplemental Guidance for Banks
Banks should describe significant concentrations of credit exposure to carbon-related assets.Additionally, banks should consider disclosing their climate-related risks (transition and physical) in their lending and other financial intermediary business activities.
  • Theme: Strategy (Business Model)
  • Text Nature Guidelines
Risk Management – Supplemental Guidance for Banks
Banks should consider characterizing their climate-related risks in the context of traditional banking industry risk categories such as credit risk, market risk, liquidity risk, and operational risk. Banks should also consider describing any risk classification frameworks used (e.g., the Enhanced Disclosure Task Force’s framework for defining “Top and Emerging Risks”).
  • Theme: Risk Management
  • Text Nature Guidelines
  • General Topic: Climate risk
Metrics and Targets – Supplemental Guidance for Banks
Banks should provide the metrics used to assess the impact of (transition and physical) climate-related risks on their lending and other financial intermediary business activities in the short, medium, and long term. Metrics provided may relate to credit exposure, equity and debt holdings, or trading positions, broken down by: Industry, Geography, Credit quality (e.g., investment grade or non-investment grade, internal rating system) and Average tenor Banks should also provide the amount and percentage of carbon-related assets relative to total assets as well as the amount of lending and other financing connected with climate-related opportunities.
  • Theme: Metrics and Targets
  • Text Nature Guidelines
  • General Topic: Climate risk
Strategy – Supplemental Guidance for Insurance Companies
Insurance companies should describe the potential impacts of climate-related risks and opportunities, as well as provide supporting quantitative information where available, on their core businesses, products, and services, including: (1) information at the business division, sector, or geography levels; (2) how the potential impacts influence client, cedent, or broker selection; and (3) whether specific climate-related products or competencies are under development, such as insurance of green infrastructure, specialty climate-related risk advisory services, and climate-related client engagement.
  • Theme: Governance
  • Text Nature Guidelines
  • General Topic: Climate risk
Strategy – Supplemental Guidance for Insurance Companies
Insurance companies that perform climate-related scenario analysis on their underwriting activities should provide the following information: description of the climate-related scenarios used, including the critical input parameters, assumptions and considerations, and analytical choices. In addition to a 2°C scenario, insurance companies with substantial exposure to weather-related perils should consider using a greater than 2°C scenario to account for physical effects of climate change and time frames used for the climate-related scenarios, including short-, medium-, and long-term milestones.
  • Theme: Strategy (Business Model)
  • Text Nature Guidelines
  • General Topic: Climate risk
Risk Management – Supplemental Guidance for Insurance Companies
Insurance companies should describe the processes for identifying and assessing climate-related risks on re-/insurance portfolios by geography, business division, or product segments, including the following risks: physical risks, transition risks and liability risks
  • Theme: Risk Management
  • Text Nature Guidelines
  • General Topic: Climate risk
Risk Management – Supplemental Guidance for Insurance Companies
Insurance companies should describe key tools or instruments, such as risk models, used to manage climate-related risks in relation to product development and pricing. They should also describe the range of climate-related events considered and how the risks generated by the rising propensity and severity of such events are managed.
  • Theme: Risk Management
  • Text Nature Guidelines
  • General Topic: Climate risk
Metrics and Targets – Supplemental Guidance for Insurance Companies
Insurance companies should provide aggregated risk exposure to weather-related catastrophes of their property business (i.e., annual aggregated expected losses from weather-related catastrophes) by relevant jurisdiction.
  • Theme: Metrics and Targets
  • Text Nature Guidelines
  • General Topic: Climate risk
Strategy – Supplemental Guidance for Asset Owners
Asset owners should describe how climate-related risks and opportunities are factored into relevant investment strategies. This could be described from the perspective of the total fund or investment strategy or individual investment strategies for various asset classes.
  • Theme: Strategy (Business Model)
  • Text Nature Guidelines
  • General Topic: Climate risk
Risk Management – Supplemental Guidance for Asset Owners
Asset owners should describe, where appropriate, engagement activity with investee companies to encourage better disclosure and practices related to climate-related risks to improve data availability and asset owners’ ability to assess climate-related risks.
  • Theme: Risk Management
  • Text Nature Guidelines
  • General Topic: Climate risk
Risk Management – Supplemental Guidance for Asset Owners
Asset owners should describe how they consider the positioning of their total portfolio with respect to the transition to a lower-carbon energy supply, production, and use. This could include explaining how asset owners actively manage their portfolios’ positioning in relation to this transition.
  • Theme: Risk Management
  • Text Nature Guidelines
  • General Topic: Climate risk
Metrics and Targets – Supplemental Guidance for Asset Owners
Asset owners should describe metrics used to assess climate-related risks and opportunities in each fund or investment strategy. Where relevant, asset owners should also describe how these metrics have changed over time. Where appropriate, asset owners should provide metrics considered in investment decisions and monitoring.
  • Theme: Metrics and Targets
  • Text Nature Guidelines
  • General Topic: Climate risk
Metrics and Targets – Supplemental Guidance for Asset Owners
Asset owners should provide the weighted average carbon intensity, where data are available or can be reasonably estimated, for each fund or investment strategy. In addition, asset owners should provide other metrics they believe are useful for decision making along with a description of the methodology used.
  • Theme: Metrics and Targets
  • Text Nature Guidelines
  • General Topic: Climate risk
Strategy – Supplemental Guidance for Asset Managers
Asset managers should describe how climate-related risks and opportunities are factored into relevant products or investment strategies. Asset managers should also describe how each product or investment strategy might be affected by the transition to a lower-carbon economy.
  • Theme: Strategy (Business Model)
  • Text Nature Guidelines
  • General Topic: Climate risk
Risk Management – Supplemental Guidance for Asset Managers
Asset managers should describe, where appropriate, engagement activity with investee companies to encourage better disclosure and practices related to climate. They should also describe how they identify and assess material climate-related risks for each product or investment strategy. This might include a description of the resources and tools used in the process.
  • Theme: Risk Management
  • Text Nature Guidelines
  • General Topic: Climate risk
Metrics and Targets – Supplemental Guidance for Asset Managers
Asset managers should describe metrics used to assess climate-related risks and opportunities in each product or investment strategy. Where relevant, asset managers should also describe how these metrics have changed over time. Where appropriate, asset managers should provide metrics considered in investment decisions and monitoring.
  • Theme: Metrics and Targets
  • Text Nature Guidelines
  • General Topic: Climate risk
Metrics and Targets – Supplemental Guidance for Asset Managers
Asset managers should provide the weighted average carbon intensity, where data are available or can be reasonably estimated, for each product or investment strategy. They should provide other metrics they believe are useful for decision making along with a description of the methodology used.
  • Theme: Metrics and Targets
  • Text Nature Guidelines
  • General Topic: Climate risk
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