COP26 was a crucial moment in the fight against climate change. TCFD reporting is an important part and something all organisations ought to plan for.
It has been a month since COP26 concluded in Glasgow and organisations have now had the opportunity to digest what was discussed. As COP26 highlighted, environmental, social, and governance (ESG) factors are increasingly important and needs to be a strategic priority for businesses, with an increased demand from stakeholders wanting to see an ESG strategy in place before they decide to do business with you.
Financial Stability Board's Taskforce for Climate Related Financial Disclosures (TCFD) are an important part of every ESG strategy, helping businesses to improve their own understanding of their long-term climate-related risks and opportunities.
What are the TCFD recommendations
The TCFD published a final report in 2017 that set out overarching recommendations in four thematic areas. Namely:
- Governance
- Strategy
- Risk Management
- Metrics and targets
Vision for TCFD reporting
The TCFD final report clearly aims to encourage wide reporting, not limited to any one sector or legal structure. The Report provides "adoptable recommendations on climate related financial disclosures that are applicable to organisations across sectors and jurisdictions".
Indeed, the UK Government appears to agree that the end-goal is for TCFD reporting across sectors. The UK Taskforce has developed a Roadmap towards mandatory TCFD-aligned disclosures across non-financial and financial sectors of the UK economy over the coming years.
Supplemental guidance is available for non-financial sectors with the highest likelihood of climate-related financial impacts. These include Real Estate Management and Development; Beverages; Agriculture; Packaged Foods and Meats; Paper and Forest Products; Automobiles and Components.
Introduction of mandatory reporting
In keeping with the FSB's priority on large asset organisations, the Roadmap presents a coordinated strategy for seven categories of organisation: listed commercial companies; UK-registered companies; banks and building societies; insurance companies; asset managers; life insurers and FCA-regulated pension schemes; and occupational pension schemes.
The first group to see any changes are listed public companies with the introduction in December 2020 of a new rule from the FCA obliging in-scope firms to disclose, on a comply or explain basis, against the recommendations of the TCFD.
Following these new measures for listed companies, it is
anticipated that new rules will be introduced for large
private companies with over 500 employees and £500 million in
turnover in April 2022.
Position of co-operatives
The reporting requirements and associated timescales for co-operative societies have not yet been confirmed. However, co-ops have been part of the wider discussions with government about TCFD disclosures.
The Co-operative Group were included on the list of respondents to the government consultation on improving governance and reporting by occupational pension schemes, which considered TCFD reporting. The Co-operative Group were quoted as being "supportive of measures".
In the run up to COP26, Co-operatives UK held co-operatives up
as ethical and environmental organisations. In a joint declaration
on behalf of the sector, co-operative business called on the UK government
to make end-to-end carbon footprint reporting mandatory for all
large business.
Whilst reporting on TCFD looks to remain voluntary for co-operative societies for the time being, with such support for climate-related reporting at a national level, local co-operatives may wish to begin considering how they would report on TCFD in future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
