Advancing TCFD guidance on physical climate risks and opportunities

Description:

The final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), released at the G20 summit in the summer of 2017, recommended that metrics on physical climate risks and opportunities should be included in financial disclosures but did not provide concrete guidance on what the appropriate metrics would be.

To address this challenge and support the emergence of standards for the disclosure of physical climate risks and opportunities, the European Bank for Reconstruction and Development (EBRD) and the Global Centre for Excellence on Climate Adaptation (GCECA) launched a targeted initiative to work with innovative thinkers in the financial and corporate sectors. The goal of this initiative was to identify the greatest needs for guidance and research and to lay the foundations for a common conceptual framework and a standard set of metrics for reporting physical climate risks and opportunities.

The EBRD-GCECA project focused on disclosure metrics specifically for corporations. Industry-led working groups with participants from the financial sector and corporations met over the first half of 2018 to discuss and consider key research questions:

• Working group 1: Metrics for physical climate risk management and disclosures
• Working group 2: Metrics for climate resilience opportunities
• Working group 3: Climate intelligence for business strategy and financial planning.

The working group discussions informed the development of a set of recommendations, presented in this report. These recommendations, primarily targeted at corporations, are intended to inform and support early efforts to adopt the TCFD recommendations.

The TCFD recommendations identify climate-related physical risks as being one of the two main types of risks that financial and non-financial corporations should disclose, including both acute (event-driven) and chronic risks (those due to longer-term shifts in climate patterns). Climate change may affect all and any part of a company’s financials, including expenditures, revenues, assets and liabilities, capital and financing. The TCFD recommends that organisations disclose information about governance, strategy and risk management, as well as metrics used to assess risks.

Reference information