The Task Force on Climate-related Financial Disclosures (TCFD) seeks to “develop recommendations for voluntary climate-related financial disclosures that are consistent, comparable, reliable, clear, and efficient, and provide decision-useful information to lenders, insurers and investors.” It has crystallised a growing concern among investors and business leaders about the physical impacts that climate change could have on the economy and on financial markets.
Without formal or regulatory guidance on metrics and indicators, firms are uncertain about what to include in their disclosures. Investors are therefore likely to receive a heterogeneous mix of financial reports including diverse indicators, metrics, assumptions and timeframes, which will fail to provide comparable data across a portfolio or provide the necessary transparency.
Recognising the challenges in the path towards standardising disclosure of physical risks and opportunities related to climate change, the European Bank for Reconstruction and Development (EBRD) and the Global Centre of Excellence on Climate Adaptation (GCECA) launched the initiative “Advancing TCFD guidance on physical climate risks and opportunities”. The initiative aims to work with innovative thinkers in the financial and corporate sectors to identify the greatest needs for guidance, research and development. It also seeks to lay the foundations for a common conceptual framework and a standard set of metrics for reporting physical climate risks and opportunities.
Early engagement with the disclosure of climate risks and opportunities enables companies to get ahead of forthcoming regulations, particularly in Europe. It allows them to anticipate and respond to investor concerns, and play an active role in shaping the field and establishing the standards that will eventually become the norm. This EBRD-GCECA report, Advancing TCFD Guidance on Physical Climate Risks and Opportunities, aims to inform and support early adoption efforts of this kind, recognising that the field is evolving rapidly and that best practices will emerge over time.