The Task Force on Climate-related Financial Disclosures was born out of the FSB or the Financial Stability Board, an international body which was itself formed in 2009 by the G20 member countries in the aftermath of the global financial crisis with the stated aim of averting another major shock to the world economy. The TCFD is an industry-led think tank created in 2015 with 32 members from across the globe chosen from the sectors of investment, accounting, banking, insurance and some of the world's largest companies, chaired by founder Michael Bloomberg. The members include both users of and preparers of financial disclosures. The TCFD consulted across a broad range of industries to identify how our changing climate might affect business in the years to come and consequently economic stability. The TCFD released its major recommendations in July of 2017 to the G20 summit in Hamburg, Germany in a 200-page report!
In a nutshell, the TCFD has a self-stated mission 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.”
When discussing “the TCFD”, this essentially refers to the four primary recommendations or themes which the organisation has published, covering Governance, Strategy, Risk Management and Metrics and Targets. The key message contained in the choices in these themes is that companies are in the future going to be required to make material declarations of the existence of climate-related risk and how it might affect their business, either positively or otherwise. There is a proposed framework with standardised metrics to aid the identification of risk and opportunity across different industries and sectors, so investors can make better-informed decisions on how to allocate capital and lenders and insurers can better understand their exposure to short, medium and long-term risk.