The TCFD was created by the Financial Stability Board to improve and increase disclosure of climate-related financial information. The reporting recommendations, released in 2017, are structured around four themes:   (1) governance, (2) strategy, (3) risk management, and (4) metrics and targets.  These themes are “supported by 11 recommended disclosures that build out the framework with information that should help investors and others understand how reporting organizations think about and assess climate-related risks and opportunities.”  The recommended disclosures, by topic, include:

• Governance: Board oversight and management’s role.

• Strategy: Description of the climate-related risks and opportunities over the short, medium, and long term; the impact of these risks on business, strategy, and financial planning; and the strategy’s resilience.

• Risk Management:  The process for identifying and assessing climate-related risks; managing those risks; and integrating them into overall risk management.

• Metrics and Targets:  Disclosure of the metrics used by the organization to assess climate-related risks and opportunities; Scope 1, 2 and (if appropriate 3) GHG emissions; and the targets used by the organization and its performance against those targets.

In 2021, the TCFD published general guidance for each of the recommended disclosures. General guidance applies regardless of the company’s sector and provides additional detail regarding the specific information to be included by all companies in each of the 11 recommended disclosures.  For example, with regard to board oversight, the TCFD’s general guidance suggests that companies specifically report on (among other things):  the “processes and frequency by which the board and/or board committees . . . are informed about climate-related issues;” “whether the board and/or board committees consider climate-related issues when reviewing and guiding strategy, major plans of action, risk management policies, annual budgets, and business plans;” and “how the board monitors and oversees progress against goals and targets for addressing climate-related issues.”

The TCFD has also issued specific guidance for number of sectors. For the financial sector, the TCFD has issued supplemental guidance for (1) banks, (2) insurance companies, (3) asset owners, and (4) asset managers.  The TCFD has also issued supplemental guidance for four non-financial groups, including:  (1) energy, (2) transportation, (3) materials and buildings, and (4) agriculture, food, and forest products.  Different supplemental guidance may apply to certain of the 11 recommended disclosures, depending on the industry.  Thus, banks may be called upon to consider supplementing their risk management disclosures by “characterizing their climate-related risks in the context of traditional banking industry risk categories such as credit risk, market risk, liquidity risk, and operational risk.” Whereas insurance companies should consider supplementing their risk management disclosures by identifying and assessing climate-related risks “by geography, business division, or product segment,” focusing on physical risks of weather-related perils, transition risks resulting from carbon regulation, and liability risks from a potential increase in litigation. 

Other reporting frameworks, such as the CDSB’s, are designed to be aligned with the TCFD recommendations.  The recently released International Sustainability Standards Board (ISSB) standards integrate the TCFD recommendations into IFRS S2 and, starting in January 2024, the ISSB will take over monitoring responsibilities from the TCFD. Certain EU reporting frameworks (e.g., the EU Non-Financial Reporting Directive’s 2019 guidelines) have integrated the TCFD’s recommendations. The U.S. SEC’s proposed climate disclosure rule, also was modeled in part on the TCFD framework.