by Scott Williams ,
ESG Coordinating Director, Marsh Middle East and Africa
06/06/2023 · 2 minute-read
A company’s action or inaction on climate change may have significant financial implications. Investors want transparency into the effects of climate-related events and trends relating to both physical and transition risk on a company’s financial performance.
This is where reporting is vital. Disclosures help investors consider the risk-return profile of companies. The Task Force on Climate-related Financial Disclosures (TCFD) recommended disclosures allow stakeholders to evaluate a company’s exposure to climate-related risks and appropriately consider them in valuations.
Companies will need to identify and quantify the impact climate change will have on their businesses in the near and distant future. They will also need an understanding of the change in risk profile caused by the low-carbon transition itself. Without a clear view of this horizon, and an indication of a company’s resilience, the ability to secure capital could be heavily impacted.
The TCFD’s recommendations provide a comprehensive framework for presenting activities and commitment to low-carbon practices. As well as demonstrating good corporate strategies and investability, it can also help your organization prepare for the challenges. Take note of any holes and gaps in your reporting — this insight will be invaluable for understanding your risk and planning for the road ahead.
The TCFD has developed a set of guidelines to help companies articulate their disclosures. Known as the Fundamental Principles for Effective Disclosure (FPEDs), disclosures should be:
By knowing and applying your FPEDs, it will be easier to implement, track, and update your own processes as needed.
Lastly it is important to remember that the potential benefits for a TCFD-aligned organization can include: