The Final Chapter of TCFD: A Legacy That Reshapes Climate Disclosure

Exploring the Transition and Continued Influence of TCFD in the Era of ISSB Standards

Introduction

In a significant turn of events, the Task Force on Climate-related Financial Disclosures (TCFD) has recently announced its disbandment following the fulfillment of its mission. Established by the Financial Stability Board (FSB) in 2015, TCFD has been instrumental in shaping how companies report climate-related financial information. Let's dive into the latest updates and what they mean for the future of climate disclosures.

What is TCFD?

The Task Force on Climate-related Financial Disclosures (TCFD) was established in December 2015 by the Financial Stability Board to develop guidelines for companies to report on climate-related financial risks. Chaired by Michael R. Bloomberg, the TCFD released its final recommendations in June 2017, focusing on governance, strategy, risk management, and metrics. Since then, its guidelines have seen increasing global adoption and have significantly influenced climate-related financial disclosure policies and standards. The TCFD's work has also been integrated into other sustainability and reporting frameworks, such as those developed by the International Sustainability Standards Board (ISSB).

TCFD's Growing Impact

TCFD's recommendations have gained remarkable traction over the years. The 2023 TCFD Status Report shows an encouraging trend: the percentage of companies aligning their disclosures with TCFD recommendations has risen sharply. In 2022, 58% of companies reported in line with at least five of the TCFD's eleven recommendations, a significant leap from 18% in 2020. Yet, there's room for growth, as only 4% of companies fully adhered to all eleven recommendations.

Asset Managers and Owners Stepping Up

The report also sheds light on asset managers and owners, with over 80% of the largest asset managers and 50% of the largest asset owners aligning with at least one of the TCFD's recommendations. However, challenges remain, particularly in acquiring sufficient information from investee companies for robust climate-related reporting.

The Road Ahead: ISSB's Role

With the TCFD disbanded as of October 2023, the baton has been passed to the International Sustainability Standards Board (ISSB). The ISSB is set to build on TCFD's legacy, focusing on interoperability with various jurisdictional frameworks and enhancing implementation guidance on climate-related topics. This transition marks a pivotal moment in standardizing climate disclosures globally.

TCFD's Enduring Legacy

Although disbanded, the TCFD's influence will persist. Its framework has been a cornerstone in the evolution of climate-related financial disclosures and will continue to guide companies in their sustainability journey. The TCFD website remains a valuable resource, housing a wealth of materials developed during its active years.

Conclusion

The disbandment of TCFD is not an end but a transformation in the journey of climate disclosure. As the ISSB takes the helm, the principles and recommendations set forth by TCFD will continue to resonate across the corporate world, driving transparency and accountability in climate-related financial reporting. As stakeholders in this global effort, it is imperative for companies, investors, and regulators to adapt and evolve, ensuring that the spirit of TCFD lives on in every disclosure and sustainability report.