Climate strategy, TCFD, and rapidly evolving regulations – what does this mean for me?
As outlined in COP26, leaders in the finance community desire that:
“every financial decision should consider climate change risks”
This requires finance, ESG, and risk management communities to unite and determine what this means for a business.
The most widely used approach is currently TCFD, although many countries are drafting their own guidelines through which this can be achieved (including, for instance, the SEC in the United States). All bodies assessing climate change strategy require an organisation to consider climate-related (and ideally broader ESG) potential threats and opportunities (risks) over several time horizons.
Mark Carney at COP26, Glasgow. Photograph taken by Satarla.
What is TCFD?
The TCFD (Taskforce for Climate-related Financial Disclosure) was set up by the Financial Stability Board (FSB) by its chairman, Mark Carney, to provide guidance on how to report their preparations to meet the inevitable challenges of climate change. The taskforce was created in response to the belief that the single greatest threat to the global financial system is climate change.
In providing this guidance, TCFD is a rich source of advice and direction to companies. This is especially true regarding analysis of climate-related risks and opportunities, and crafting strategies to mitigate risks and exploit opportunities. This is addressed through appropriate Governance, Strategy, Risk Management, and Metrics & Targets.
What does this mean for me?
Climate Risk Management is becoming an integral part of an organisation’s risk management and reporting context. Companies are increasingly required to assess, manage, and report on climate-related risks. TCFD-compliant reporting is already mandatory for some companies listed on the UK stock exchange, and we are seeing a dramatic increase in investors and authorities requiring reports that explicitly follow the TCFD guidelines.
If you are not already required to deliver a TCFD disclosure as part of an annual report or a sustainability report, there is a very good chance you will be soon.
TCFD guidelines are not onerous, but they recommend a number of activities, workflows, and initiatives. The reception of a disclosure by investors and authorities depends on the credibility and coherence with which these aspects and their conclusions are described. Thus, TCFD guidelines are much more than just a reporting standard; they are the instrument with which the global financial and investment community is trying to ensure that companies face up to the challenges of climate change and adapt to its imperatives.
Managing climate-related risks in alignment with the TCFD framework is the first step towards creating a holistic Climate Strategy for your organisation. This enables you to identify and manage your climate-related risks, identify and communicate the positive steps you are taking, and put in place processes to ensure that your organisation is both resilient and adaptable in the face of climate-change and best able to take advantages of the opportunities it brings.
The success of a TCFD disclosure is not in the quality of the reporting so much as in the quality of the activities that constitute the content of a TCFD disclosure.
How can Satarla help?
Satarla is recognised as a world-leading expert in enterprise risk management and environment, social, and governance (ESG) consultancy. Satarla have been working with TCFD since the release of the guidelines in 2017 and helping companies analyse and adapt to the risks and opportunities of climate change for much longer.
With world-class expertise in strategy and scenario analysis, Satarla are uniquely placed to address two of the most fundamental components of T
CFD (most notably Governance and Strategy). Moreover, Satarla’s expertise is not limited to climate: Satarla brings a broader ESG perspective to its work on climate risk and impact management, regularly helping companies develop innovative and practical risk management systems that work – again, a fundamental aspect of the Risk Management TCFD pillar. This helps organisations to ensure that the systems and processes put in place enable strong, TCFD-aligned climate disclosures, that are future-fit, anticipate trends beyond the current focus on carbon and climate, and can be used to manage a broader set of ESG concerns as and when required. As a result, the Metrics & Targets pillar is also well-addressed.
With its unique associate network structure, Satarla is uniquely placed to provide organisations with exactly the skills and experience they require to prepare for the transition to a green economy and to capture and articulate those initiatives in a best-in-class TCFD disclosure.
For more information on the services that Satarla can offer with regards to climate change strategy, our Menu of Services can be found here: