In June 2017, the Taskforce on Climate-Related Financial Disclosures (TCFD) released the recommendations that companies should use to report their efforts on sustainability. More than 2,600 organizations support the recommendations, but some have indicated the need for additional guidance on implementation. With more parties, including governments, like the UK and New Zealand, indicating they will make TCFD mandatory, the correct implementation is becoming even more important. To get it right, here is a comprehensive guide for financial disclosures with TCFD.
The TCFD framework was created by the Sustainability Accounting Standards Board (SASB and Climate Disclosure Standards Board (CDSB) to help increase transparency on climate-related risks. The framework works with the four main pillars, which can help investors and other stakeholders determine how sustainable an enterprise is. Here is a closer look at the pillars:
The leadership of an organization plays a huge role in addressing climate-related challenges and opportunities. Therefore, investors are very interested in knowing how a company of interest is governed. Governance system that focuses on sustainability should demonstrate the following:
Today, many companies are faced by the impacts of climate-related issues. With the current trend expected to continue over time, your company must be alive to the associated risks and opportunities. Then, you have to craft a strategy to address them. So, the strategy pillar of financial disclosures by TCFD requires the following:
While some companies use the traditional enterprise risk management (ERM) model for identifying, assessing, and managing climate-related risks, the practice is not widespread. If your firm does not have a good way of managing risks, there is a danger of facing unexpected impacts on profitability and viability. TCFD calls for companies to disclose their methods of managing risks and how they manage them. Specifically, you need to:
In addition to the considerations associated with governance, risk management, and strategy, financial disclosures using the TCFD framework requires the application of metrics and targets. The metrics you employ can help illuminate the effectiveness of the strategies adopted for addressing climate-related risks and opportunities. Here are the disclosures recommended by TCFD in line with the materiality assessment:
As you can see, financial disclosures with TCFD can be pretty complex, but you are sure of getting it right with Diginex.com experts. Our professionals have the experience and tools, including the latest ESG reporting software, to help you correctly apply the TCFD framework in your organization. Talk to us to learn more about TCFD and start using it right away.
The primary benefit of ESG accounting is that it helps to identify the risks and opportunities facing your company.
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