TCFD finds more companies making climate disclosures in final report

The Financial Stability Board’s Task force on Climate-related Financial Disclosures is seeing more than half of companies issuing at least a handful of the disclosures it recommends as it prepares to cede control of its framework to the International Sustainability Standards Board.

The TCFD published its sixth and final status report Thursday. The Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, established the TCFD in 2015. The TCFD released its final recommendations in June 2017, providing a framework for companies and other organizations to develop more effective climate-related financial disclosures. The TCFD framework and recommendations have since become the underlying basis of many sustainability standards, including the climate-related disclosure standard released by the ISSB in June, as well as the proposed climate-related disclosure rule proposed last year by the Securities and Exchange Commission that’s expected to be finalized this year. Shortly after the ISSB released its climate-related and general sustainability-related disclosure standards in June, the FSB indicated the standards represent a culmination of the task force’s work and that the TCFD would be disbanded upon release of its 2023 status report, which came out on Thursday. 

The report found that for fiscal year 2022 reporting, 58% of companies disclosed in line with at least five of the 11 recommended disclosures, up from 18% in 2020. However, only 4% disclosed in line with all 11 recommended disclosures. However, the vast majority (97) of the 100 largest companies in the world have declared support for the TCFD, report in line with the TCFD recommendations, or both.  Over 80% of the largest asset managers and 50% of the largest asset owners reported in line with at least one of the 11 recommended disclosures.  

Nevertheless, disclosure of climate-related financial information in financial filings is limited. On average for fiscal year 2022, information aligned with the 11 recommended disclosures was four times more likely to be disclosed in sustainability and annual reports than in financial filings.  

“The TCFD has helped to drive immense progress on climate-related financial disclosures — and this year’s status report shows how far we have come,” said former SEC chair Mary Schapiro, who is currently head of the TCFD Secretariat and vice chair for global public policy at Bloomberg L.P., in a statement Thursday. “We are grateful for the partners who have made this important work possible, including the Financial Stability Board for its leadership in establishing the TCFD, the Task Force members, and Chair Michael Bloomberg. It has been an honor to lead this work and I am proud to cap off a remarkable eight years with today’s report and look forward to continued efforts to further progress on transparency, particularly in support of the development of net-zero transition plans.”

The TCFD has seen over 4,800 organizations indicate their support for its recommendations, ranging from companies and civil society to governments, Bloomberg pointed out in an introduction to the report. “However, more needs to be done,” he added. “As this report describes, although companies continue to make progress in their disclosures, significant gaps in data remain. In particular, reporting the impact of climate change on companies’ businesses, strategies, and financial planning is still lagging behind.”

The TCFD made several recommendations in the report, including the need to continue to emphasize the importance of companies’ disclosure of the resilience of their strategies under different climate-related scenarios, including a climate-related scenario aligned with the latest international agreement on climate change. Regulators, standard-setters like the ISSB and other appropriate bodies should also ensure interoperability of the ISSB standards with regional and jurisdictional frameworks to support consistent company reporting across jurisdictions and avoid multiple reporting venues. They should also develop implementation guidance on topics like climate-related physical risk assessment and adaptation planning, climate-related scenario analysis at a sector or industry level, and Scope 3 greenhouse gas emissions measurement at a sector or industry level. The report also recommended they should focus on decision-useful disclosure on other sustainability topics — such as biodiversity, water and social issues — and consider the linkages between climate-related and other sustainability issues. Another recommendation is to develop a climate-related financial disclosure framework for use by countries and other sovereign entities, as consistent sovereign disclosure would support companies’ in preparing comprehensive climate-related financial disclosure. 

Starting next year, the ISSB will assume responsibility of monitoring climate-related disclosures and reporting to the FSB. However, all the TCFD status reports, implementation guidance and other information will remain available at www.fsb-tcfd.org.