What is the TCFD?
The TCFD is a task force created by the Financial Stability Board in 2015, designed to help organisations disclose climate-related risks and opportunities. It is made up of a global group of 32 members, selected by the Financial Stability Board, who come from various organisations including large banks, insurance companies, asset managers, pension funds, large non-financial companies, accounting and consulting firms, and credit rating agencies.
The task force created a framework: Recommendations of the Task Force on Climate-related Financial Disclosures for organisations to disclose their governance, strategy, metrics and targets and risk management practices.
The framework is aimed at companies looking to reassure investors of their commitment to meeting the Paris Climate Agreement’s target of staying well under 2⁰C.
To help identify the information needed by investors, lenders, and insurance underwriters to appropriately assess and price climate-related risks and opportunities, the Financial Stability Board established an industry-led task force: the Task Force on Climate-related Financial Disclosures (Task Force).
How did the recommendations become compulsory?
The recommendations became mandatory for companies in the UK under the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/31) (CFD Regulations) and for LLP’s under the Limited Liability Partnerships (Climate-related Financial Disclosures) Regulations 2022 (SI 2022/46) (LLP CFD Regulations) (SI 2022/46) (LLP CFD Regulations).
What dates will companies need to report from?
Who do the regulations apply to?
The CFD regulations apply to:
Any company that during the financial year to which the report relates is one of the following:
What do those affected by the regulations have to do?
It varies slightly between the different entities that fall within the regulations but broadly all in-scope entities must include climate-related financial disclosures (CRFD) in their non-financial and sustainability information statement (NFSI statement) (or the LLP equivalent).
Some entities must also include certain other information necessary for an understanding of the company’s development, performance and position and impact of its activities.
The BEIS guidance sets out the information that is required as being the following:
Both companies and LLPs are required to disclose the following information:
There is increasing scrutiny of companies, especially those with a significant carbon footprint or other environmentally damaging operations. A complete, fact-based TCFD disclosure is a first step in transparency and decreasing the likelihood of climate-change related lawsuits.
Is there any recommended guidance?
Yes. BEIS has published guidance on the NFSI statement requirements in the form of a non-binding Q&A.
Edward de la Billiere
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