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Getting to Know the Task Force on Climate-Related Financial Disclosures

While task forces on various topics are created regularly for a variety of reasons, one important and timely concern is climate change. To help address this topic, The Task Force on Climate-Related Financial Disclosures or TCFD was created in 2015 according to an article in Investopedia.com, to develop “a set of voluntary climate-related financial risk … Continued

While task forces on various topics are created regularly for a variety of reasons, one important and timely concern is climate change.

To help address this topic, The Task Force on Climate-Related Financial Disclosures or TCFD was created in 2015 according to an article in Investopedia.com, to develop “a set of voluntary climate-related financial risk disclosures which can be adopted by companies so that those companies can inform investors and other members of the public about the risks they face related to climate change…”

It was created by the Financial Stability Board or FSB “as a means of coordinating disclosures among companies impacted by climate change. The Task Force is charged with considering “the physical, liability and transition risks associated with climate change and what constitutes effective financial disclosures across industries,” according to the organization’s mission statement.

Additionally, its  aim is to increase the amount of reliable information on financial institutions’ exposure to climate-related risks and opportunities to strengthen the stability of the financial system, contribute to a greater understanding of climate risks and facilitate financing the transition to a more stable and sustainable economy.

Climate Change, Hot Topic

Of course, climate change in general, is and continues to be a hot and debatable topic. On any given day there are news articles reporting on the subject matter and how the world is addressing this controversial issue.

Because climate change can and is currently placing businesses, companies, organizations and humans at risk and threatens to in the future, experts suggest all concerned should be more aware.

It’s no secret the Earth’s temperatures are changing and increasingly natural disasters are playing havoc with ecosystems around the globe. Such changes can and have been known to cause unpredictable business losses, affect human life, and endanger assets and infrastructure.

To try and change the course of these issues, governments and private sector groups are working on various ways to reduce global emissions, which in the end may provide a turnaround in some economic areas and regions.

However, even if the TCFD is doing its due diligence, there is no guarantee that it can make headway in helping those sectors across the board.

In addition, investors, lenders, and insurers don’t know which companies will be able to keep up or grow as the environment alters, regulations advance, new technologies come forth, and consumer attitudes change — or which companies will wrestle with climate change and what it may bring.

For example, the TCFD suggests without “reliable climate-related financial information, financial markets cannot price climate-related risks and opportunities correctly and may potentially face a rocky transition to a low-carbon economy, with sudden value shifts and destabilizing costs if industries must rapidly adjust to the new landscape.”

Working Hard

The Financial Stability Board funded the TCFD to find recommendations for more effective climate-related disclosures that would promote more informed investment, credit, and insurance underwriting decisions, and it’s working hard to succeed.

If these recommendations went into effect it may push stakeholders to understand carbon-related assets in the financial arena and the financial system’s climate-related risks.

In 2017, the TCFD released climate-related financial disclosure recommendations to help companies offer better information to support informed capital allocation.

These recommendations have four thematic areas representing “core elements of how organizations operate: governance, strategy, risk management, and metrics and targets. These thematic areas are intended to interlink and inform each other.”

The task force continues to be dedicated to assisting companies and others implement the recommendations, as well as advocating advancements in the availability and quality of climate-related disclosure.

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