Understanding TCFD: How Climate-Related Disclosures Can Enhance Your ESG Reporting

Authors: Chika Acholonu, Dana Weiss, Simone Fraid





In a recent Verdani Partners article, we detailed the key steps for building out a strong resilience program for CRE assets. The Task Force on Climate-Related Financial Disclosures (TCFD) is not only a highly useful framework for establishing and aligning with resilience best practices, but it is also increasingly becoming integrated into regulatory disclosures. TCFD recommendations are also integrated into the forthcoming International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards for Climate-related Disclosures, anticipated to be finalized in late 2022.

Below, we provide an overview of TCFD and its recommendations for companies to consider in their resilience efforts and climate risk-related reporting.


What is TCFD?

The Financial Stability Board (FSB) established the TCFD in 2015 to provide investors and other providers of capital with financially material climate-related disclosures.


Ultimately, TCFD’s purpose is to promote more informed capital allocation and to enable stakeholders to understand companies’ climate-related risks and opportunities.

TCFD developed 11 voluntary recommendations that companies may adopt to disclose their climate-related risks and opportunities to stakeholders. The recommendations are structured around four pillars: governance, strategy, risk management, and metrics and targets.


TCFD’s Disclosure Recommendations

The table below shows the TCFD pillars and recommendations for organizations to include in their reporting. These recommendations can help shape organizations’ resilience and risk management approach and planning.



Credit: FSB Task Force on Climate-related Financial Disclosures


TCFD International Regulatory Disclosure Alignment

TCFD recommendations are increasingly influencing climate-related financial disclosure regulations worldwide

  • Mandatory TCFD-aligned disclosures in the United Kingdom [i]

  • New U.S. Securities and Exchange Commission (SEC) regulation includes physical and transition risk disclosures in alignment with TCFD recommendations [ii]

  • Additional countries and governing bodies incorporating TCFD recommendations include the European Union, Singapore, Canada, Japan and South Africa [iii]

Next Steps

Interested in aligning with TCFD recommendations?

  • Become a TCFD supporter to demonstrate your company’s commitment to climate-related disclosure

  • Review your existing programs for TCFD alignment; identify the programs and practices that address the recommendations

  • Develop a plan to address any gaps identified in your program review

  • Report your TCFD disclosures in your Form 10-K (for public companies) and/or your annual ESG report

  • Be on the lookout for the release of the IFRS Sustainability Disclosure Standards for Climate-related Disclosures

 

References


[i]George, Sarah. (April 2022). TCFD mandate: Everything you need to know about the UK’s new climate disclosure requirements. Retrieved from: https://www.edie.net/tcfd-mandate-everything-you-need-to-know-about-the-uks-new-climate-disclosure requirements/#:~:text=The%20required%20disclosures%20are%3A,climate%2Drelated%20risks%20and%20opportunities.


[ii] Securities and Exchange Commission (2022). Enhancement and Standardization of Climate-Related Disclosures Fact Sheet. Retrieved from: https://www.sec.gov/files/33-11042-fact-sheet.pdf


[iii] Dickinson, Paul. (January 2022). “Environmental disclosure—so much progress, but so far still to go. Retrieved from: https://www.responsible-investor.com/environmental-disclosure-so-much-progress-but-so-far-still-to-go/.


 

About the Authors


Chika Acholonu


FSA Credential Holder, LEED Green Associate Chika is an Associate Director of ESG for Verdani Partners. He acts as the account manager for various corporate ESG clients, leading them in their ESG reporting efforts, as well as tenant and employee engagement initiatives. He also develops and delivers training to colleagues and clients, and holds the role of chair for the Verdani Diversity, Equity, and Inclusion (DEI) Committee. Chika holds a B.S. in Environmental Science and Resource Management from the University of Washington.



Dana Weiss


Dana currently serves as an ESG Director for Verdani Partners and leads Verdani's Resilience Committee. She brings 15 years of experience in sustainable design and corporate responsibility. She has developed and implemented ESG policies and protocols for clients across the real estate sector and is currently advising on ESG for over $35 billion in client assets under management. Dana holds a Bachelor of Landscape Architecture and an MBA in Sustainable and Socially Responsible Business.





Simone Fraid


Simone is a Communications Manager at Verdani Partners. In her role, she supports annual report drafting for clients, manages Verdani marketing efforts, and provides writing and editing support to the wider Verdani team. She holds a BA in Public Relations from the University of Oklahoma, a certificate in Sustainable Business Practices, and is accredited as a LEED Green Associate and TRUE Advisor.