TCFD Good Practice Handbook Webinar Slides
•Descargar como PPTX, PDF•
3 recomendaciones•1,139 vistas
Created by the Climate Disclosure Standards Board (CDSB) and the Sustainability Accounting Standards Board (SASB), the TCFD Good Practice Handbook offers real-world examples of TCFD aligned disclosures in mainstream reports across many G20 countries. Striking a balance between financial and non-financial sectors, the Handbook helps you understand how organisations in your industry are implementing the TCFD recommendations and provide insight into good practice techniques to enhance your own climate-related financial disclosures.
Recomendados
Recomendados
Más contenido relacionado
La actualidad más candente
La actualidad más candente (20)
Similar a TCFD Good Practice Handbook Webinar Slides
Similar a TCFD Good Practice Handbook Webinar Slides (20)
Más de CDSB
Más de CDSB (13)
Último
Último (20)
TCFD Good Practice Handbook Webinar Slides
- 1. Nadine Robinson, Technical Director, Climate Disclosure Standards Board (CDSB) David Parham, Director of Research – Projects, Sustainability Accounting Standards Board (SASB) Moderator: Lesley McKenna, Communications Manager, Climate Disclosure Standards Board Presenters: TCFD masterclass: Good practice in implementation
- 2. October 19 | Tweet @CDSBGlobal Is your organisation currently implementing the TCFD recommendations in the mainstream report? Yes No Intend to do so in the next three years
- 3. October 19 | Tweet @CDSBGlobal Board Technical Working Group (examples) To provide decision-useful environmental information to markets via the mainstream corporate report
- 4. October 19 | Tweet @CDSBGlobal TCFD masterclass: good practice in implementation Reporting Requirements REQ-01 Governance REQ-07 Organisational boundary REQ-02 Management’s environmental policies, strategy and targets REQ-08 Reporting policies REQ-03 Risks and opportunities REQ-09 Reporting period REQ-04 Sources of environmental impact REQ-10 Restatements REQ-05 Performance and comparative analysis REQ-11 Conformance REQ-06 Outlook REQ-12 Assurance cdsb.net/Framework The CDSB Framework 4
- 5. October 19 | Tweet @CDSBGlobal 77 industry-specific disclosure standards Used by companies and investors globally SASB connects businesses and investors on the financial impacts of sustainability SASB – Sustainability Accounting Standards Board Independent, non-profit standards-setting organization for ESG information 5TCFD masterclass: good practice in implementation
- 6. October 19 | Tweet @CDSBGlobal The SASB Approach SASB standards are created for the market, by the market Decision-Useful Cost-Effective Financially Material Industry-Specific Evidence-Based Market-Informed 6TCFD masterclass: good practice in implementation
- 7. October 19 | Tweet @CDSBGlobal CDSB & SASB alignment on climate disclosure • SASB Standards help organisations to collect, structure, and effectively disclose related performance data for material, climate-related risks and opportunities they have identified • CDSB Framework helps organisations integrate and disclose the financially material climate and natural-capital related information into their annual reports • TCFD recommendations serve as a global foundation for effective climate-related disclosures 7TCFD masterclass: good practice in implementation
- 8. October 19 | Tweet @CDSBGlobal FSB Task Force on Climate-related Financial Disclosures “Increasing transparency makes markets more efficient, and economies more stable and resilient.” — Michael R. Bloomberg, Chair, TCFD. “In the future, disclosure will move into the mainstream, and it is reasonable to expect that more authorities will mandate it.” — Mark Carney, Former Chair of FSB, Governor of the Bank of England. Mark Carney (L) and Michael Bloomberg (R) Image credit: Bloomberg 8TCFD masterclass: good practice in implementation
- 9. October 19 | Tweet @CDSBGlobal Governance Strategy Risk Management Metrics and Targets Disclose the organization’s governance around climate-related risks and opportunities. Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material. Disclose how the organization identifies, assesses, and manages climate-related risks. Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material. a) Describe the board’s oversight of climate-related risks and opportunities. a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term. a) Describe the organization’s processes for identifying and assessing climate-related risks. a) Disclose the metrics used by the organization to assess climate- related risks and opportunities in line with its strategy and risk management process. b) Describe management’s role in assessing and managing risks and opportunities. b) Describe the impact of climate- related risks and opportunities on the organization’s businesses, strategy, and financial planning. b) Describe the organization’s processes for managing climate- related risks. b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks. c) Describe the resilience of the organisation’s strategy, taking into consideration different climate- related scenarios, including a 2°C or lower scenario. c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management. c) Describe the targets used by the organization to manage climate- related risks and opportunities and performance against targets. 9TCFD masterclass: good practice in implementation
- 10. October 19 | Tweet @CDSBGlobal “... progress must be accelerated. Today’s disclosures remain far from the scale the markets need to channel investment to sustainable and resilient solutions, opportunities, and business models. I believe in the power of transparency to spur action on climate change through market forces.” Michael Bloomberg, Chair, TCFD
- 11. October 19 | Tweet @CDSBGlobal Investors’ need for decision-useful climate information Key Takeaways from an Investor Survey on TCFD Disclosure conducted by SASB Governance Strategy Risk Management Metrics and Targets Survey respondents identified the value of: • Specificity and detail around board level oversight of climate risk • Frequency and types of interactions with management around climate- related performance • The use of targets to establish accountability around performance. Survey respondents identified the value in: • Having specific time horizons specified • Stronger and more clear connections to financial impacts and the long-term financial benefits • More clarity on the materiality assessment of climate-related risks Survey respondents identified the value in: • Having clear definitions of the categories and specific channels of risk • Greater clarity around the process by which companies prioritized risks • More information about how the process informed the board’s decisions around strategic resilience. Survey respondents identified the importance of: • How the targets set by a company relate to its strategy, and in being able to track and understand a company’s performance • Historical performance data • Disclosure of the calculation methodology • More robust normalization factors to facilitate comparability 11TCFD masterclass: good practice in implementation
- 12. October 19 | Tweet @CDSBGlobal Twin tools to make TCFD aligned disclosures TCFD Good Practice Handbook 12 ww.cdsb.net/tcfdguide ww.cdsb.net/tcfdhandbook
- 13. October 19 | Tweet @CDSBGlobal TCFD Good Practice Handbook Annual reports from across the G20 13TCFD masterclass: good practice in implementation
- 14. October 19 | Tweet @CDSBGlobal Barrick, New Value Champion: Annual Report 2018 (pg. 28) In this succinct extract, the Canadian mining company Barrick states which board-level committee is responsible for overseeing policies, programmes and performance related to climate change. It states that this committee met quarterly, although it could be made explicit whether climate change featured on the agenda of each of these meetings. The disclosure also states that climate change is built into the company’s formal risk management process. This shows the interconnectivity of the governance and risk management core TCFD elements and associated disclosures, with the two TCFD governance disclosures covering who in the business is involved and the risk management disclosures covering what processes are used to manage and monitor the associated climate-related risks. This governance disclosure on board oversight also helpfully explains the roles of both the audit and risk committees and their interface with the company’s Board, which is not always clear in other governance disclosures. https://barrick.q4cdn.com/788666289/files/annual-report/Barrick-Annual-Report-2018.pdf Governance 14TCFD masterclass: good practice in implementation
- 15. October 19 | Tweet @CDSBGlobal Royal Bank of Canada, Annual Report 2018 (pg. 5 and 89) This second extract from the Royal Bank of Canada explains which functions are involved in identifying, assessing, monitoring and reporting on climate-related issues, and ties this back to performance goals at a management level. This extract from the Royal Bank of Canada, a Canadian multinational banking and financial services company, shows that climate issues feature prominently at the top. Here, the Chair of the Board, in introducing the annual report, refers to “climate change as the most pressing issue of our age” and explains the Board’s oversight function in this respect. https://annualreports.rbc.com/ar2018/ Governance 15TCFD masterclass: good practice in implementation
- 16. October 19 | Tweet @CDSBGlobal Danone, Registration Document 2018 (pg. 28 and 179) https://www.danone.com/content/dam/danone-corp/investors/en-all-publications/2018/registrationdocuments/Danone%20-%20Registration%20Document%202018_Access.pdf In this extract, Danone, a French multinational food products company, includes its climate policy, which extends beyond climate change to include natural capital. It also cross-refers to its wider risk identification and management processes. It identifies specific medium-term risks (although the duration is undefined), such as potential challenges with sourcing key ingredients for its products in different geographies due to drought and weather conditions. In this second extract, Danone reinforces the linkages between natural capital and climate change. It notes that physical climate risks affect water cycles and availability, soil, biodiversity and ecosystems, and acknowledges the corresponding impacts on its products, processes, activities, operations, supplier and stakeholder relationships. It then makes the crucial link of how these could impact its results and financial situation. In this second column, Danone also refers to its Climate Policy and objectives as a risk management measure, illustrating the interconnected nature of the risk management and strategy TCFD disclosures. Presenting a description of the risks alongside their management actions helps to better convey this information. Strategy 16TCFD masterclass: good practice in implementation
- 17. October 19 | Tweet @CDSBGlobal EDF, Reference Document 2018 (pg. 158 and 159) Strategy 17 French electric utility company EDF identifies both the risks and opportunities of climate change on its business. It provides examples of transition risks in the forms of regulatory changes in France and the EU, as well as technological changes such as decentralised, low- carbon, digital energy. EDF explains in detailed bullets how climate change will impact the company’s assets, operations, products and services, value chain and suppliers, financial planning and performance, capital expense and allocation, access to capital, investments and acquisitions, and R&D. It also cross-refers to where these climate risks are identified as part of the company’s risk exposure. https://www.edf.fr/sites/default/files/contrib/groupe-edf/espaces-dedies/espace-finance-en/financial-information/regulated-information/reference-document/edf-ddr-2018- en.pdf TCFD masterclass: good practice in implementation
- 18. October 19 | Tweet @CDSBGlobal Eni, Annual Report 2018 (pg. 108-9) RiskManagement https://www.eni.com/docs/en_IT/enicom/publications-archive/publications/reports/reports-2018/Annual-Report-2018.pdf Having outlined the overall risk management framework, Eni then explains where climate risks fit in – noting that climate risks are identified as a top strategic risk, which are “analysed, assessed and monitored” at the highest level in the organisation, i.e. by the CEO as part of the overall risk management framework. Eni relates the risk to its Strategic Plan showing the connectivity of TCFD disclosures between strategy and risk management elements. Eni also outlines its process for prioritising risks using matrices considering its level of risk, probability of occurrence, and quantitative and qualitative impact. The disclosure also states the scope of risk coverage, addressing relevant categories of climate risks including both transition and physical risks, and the process for identifying risks and who is involved within the business. The interconnectivity of the TCFD disclosures is reinforced here with a strong link between risk coverage and use of scenario analysis as a tool for assessing energy transition risk. Eni explains that it has developed and adopted an Integrated Risk Management model to ensure management takes risk- informed decisions over different time horizons. 18TCFD masterclass: good practice in implementation
- 19. October 19 | Tweet @CDSBGlobal HSBC Holdings Plc, Annual Report and Accounts 2018 (pg. 29) RiskManagement https://www.hsbc.com/-/files/hsbc/investors/hsbc-results/2018/annual/hsbc-holdingsplc/190219-annual-report-and-accounts-2018.pdf?download=1 British multinational banking and financial services institution HSBC shows how climate risks can be integrated into existing risk management processes over time. For example, it explains how the bank is working to embed transition risks into its day-to-day credit management. Moreover, the bank has identified six higher transition risk sectors based on their contribution to global carbon dioxide emissions and considers its exposure to these. 19 Risk management We are increasingly incorporating climate-related risk, both physical and transition, into how we manage and oversee risks internally and with our customers. Climate risk is now included as a theme in our ‘Top and emerging risks report’ to ensure that it receives monthly management oversight via the Risk Management Meeting of the Group Management Board (‘RMM’) (see page 30). In addition, our Board-approved risk appetite statement contains a qualitative statement on our approach to sustainability, which will be further expanded in 2019 to include climate risk explicitly. We have a number of sustainability risk policies covering specific sectors. In 2018, we updated our energy policy to limit the financing of high-carbon intensity energy projects, while still supporting energy customers on their transition to a low-carbon economy. From the release of the new energy policy in April 2018 until the end of 2018, HSBC financed no new coal-fired power plants. Transition risk, in the context of climate change, is the possibility that a customer’s ability to meet its financial obligations will deteriorate due to the global movement from a high-carbon to a low-carbon economy. HSBC is working to embed transition risk into its day-to-day credit risk management. The aim is that over time, each wholesale counterparty will receive a client transition risk rating based on their susceptibility to, and ability to manage transition risk. We have identified six higher transition risk sectors based on their contribution to global carbon dioxide emissions. These sectors are: oil and gas; building and construction; chemicals; automotive; power and utilities; and metals and mining. Over time we may identify additional sectors as having higher transition risk depending on a variety of factors, including country level carbon dioxide reduction plans per the Paris Agreement. The table below presents our exposure to the six higher transition risk sectors. These figures capture all lending activity, including environmentally responsible customers and sustainable financing. Further details on our approach to the quantification of exposures can be found in footnote 37 on page 67. This is expected to evolve over time as we develop new climate-related metrics. Climate risk will also be explicitly included in the Board-approved risk management statement for 2019, showing the crucial linkages between board oversight of climate-related issues and risk management. The excerpt also shows how risk management disclosures and underlying approaches are likely to mature and evolve over time and will include development of related metrics. TCFD masterclass: good practice in implementation
- 20. October 19 | Tweet @CDSBGlobal Metrics&Targets http://2018ar.prudentialreports.com/src/assets/pdf/Prudential-AR2018.pdf In its data table, Prudential reports its Scope 1, 2 and 3 emissions and breaks down such emissions by both its occupied estate as well as its investment estates. Prudential’s previously discussed focus on its Scope 2 emissions are supported by the relatively high degree to which such emissions contribute to its overall emissions. Prudential also reports several normalised metrics, using factors to establish efficiency ratios that can enhance comparability across companies to the extent such ratios are generally accepted. Prudential has also established a target with a base year of 2018 to achieve 100% renewable electricity by 2025 across its occupied and management investment estates. It notes that it has had its Scope 2 group emissions independently assured, enhancing investor confidence in the reliability of the reported data. Prudential, a British multinational life insurance and financial services company, provides an in-depth discussion of its climate-related performance. When discussing its Scope 1, 2, and 3 emissions, Prudential specifically notes the scope and methodology utilised to calculate its Scope 3 emissions related to the air travel of its employees. Prudential also provides in-depth discussion on its Scope 2 emissions, which make up the majority of its overall emissions. Prudential, We do life: Annual Report 2018 (pg. 76-7) 20TCFD masterclass: good practice in implementation
- 21. October 19 | Tweet @CDSBGlobal Metrics&Targets https://www.goldfields.com/pdf/investors/integrated-annual-reports/2018/iar-2018.pdf Gold Fields, a South African mining company, reports its Scope 1, 2, and 3 emissions both separately and in aggregate, providing investors with a complete picture of its major sources of emissions associated with its operations. Gold Fields, Integrated Annual Report 2018 (pg. 97) 21 Gold Fields describes the changes year-over-year in its emissions and attributes these changes to a decrease in its total energy usage. In addition to reporting its emissions in millions of tonnes of CO2 equivalent, the company also provides a normalised emissions factor by ounce of gold produced, noting that this factor was unchanged year-over-year due to a decrease in gold production coincident with its decrease in energy usage. Finally, Gold Fields notes an aspirational target with a base year of 2017 and a target year of 2020 to reduce its cumulative carbon emissions and reports its progress against this target in the two most recent reporting years. TCFD masterclass: good practice in implementation
- 22. October 19 | Tweet @CDSBGlobal 7 top tips 1. Adopt the correct lens for looking at climate-related risks 2. Make holistic disclosures 3. Distinguish between climate leadership and management 4. Explain how you assess the material risk of climate change to your business 5. Disclose using existing standards and metrics 6. Make as many of the 11 recommended disclosures are you can 7. Put it in your mainstream report Learning from good practice in climate-related financial disclosures Don’t let the perfect be the enemy of the good 22TCFD masterclass: good practice in implementation
- 23. October 19 | Tweet @CDSBGlobal Where to learn more? tcfdhub.org CDP helps companies collect, report and structure their data. SASB will help companies understand what is material to their organisation. CDSB helps companies integrate the financially material information into their annual reports. 23 ww.cdsb.net/tcfdguide ww.cdsb.net/tcfdhandbook learn.tcfdhub.org TCFD masterclass: good practice in implementation ww.corporatereportingdialogue.com
- 24. October 19 | Tweet @CDSBGlobal Q&A Nadine.Robinson@cdsb.net David.Parham@sasb.org Nadine Robinson, David Parham, Technical Director, CDSB Director of Research – Projects, SASB
Notas del editor
- Nadine : The Climate Disclosure Standards Board is a consortium of 9 environmental and business NGOs. We were set up in Davos in 2007 with a mission to create the enabling conditions for material climate change and natural capital information to be integrated into the mainstream report. We achieve our mission by offering a framework for reporting environmental and climate information.
- Nadine: Before we delve into the Handbook, I would like to take a moment to remind everyone of the CDSB Framework for reporting climate and environmental information. The 7 principles and 12 requirements of the CDSB Framework 7 guiding principles (how to report) 12 reporting requirements (what to report) Fully aligned with the TCFD recommendations Complementary to existing reporting provisions (CDP, GRI, SASB) and existing regulations Referenced in the EU NFRD guidance and stock exchange guidance globally Now I will hand over to David to say a few words about their market-tested standards which can aid in TCFD Implementation.
- David: Standards development overseen by SASB Standards Board Follows rigorous, evidence-based, market-informed process Maintains industry-specific standards for 77 industries in 11 sectors [growing uptake like the TCFD] Designed for use in financial reports targeted to investors Guided by a strong conceptual framework grounded in financial materiality Operated under the auspices of the SASB Foundation, a non-profit organization
- David: When SASB begun standards setting in 2011, our goal was to create standards that facilitate the disclosure of financially material sustainability information, that is decision-useful and comparable, for both investors and companies, and cost-effective for companies to implement. In order to create standards with these pillars in mind, we took an industry-specific approach, with standards that are informed by market feedback, and rooted in evidence.
- David: So how do SASB, CDSB and TCFD fit together? The SASB standards can help you with the content for your disclosures by generating financially material data and information. CDSB framework has a set of principles and requirements. The principles cover how to report. The requirements cover what to report in your mainstream report. Both the SASB standards and CDSB framework can be used as analytical tools to help make high-quality consistent, comparable TCFD disclosures in the mainstream report.
- Nadine - To get started we thought it might be useful for those new to TCFD and to recap for others about the TCFD. The TCFD builds on existing frameworks and standards and other requirements (like the CDSB Framework and the SASB standards) – seen as a unifier, and for many the gold standard for making universally applicable climate-related disclosures -TCFD has helped to galvanise political will and to bring climate-related disclosures into the mainstream and into the board room. So we have awareness with over 800 TCFD supporters. We are seeing increased momentum in the number and extent of corporate disclosures. And we would like to see this go further and faster. Mandatory is one way but it is also important to provide capacity-building support and to recognise the evolving body of good practice climate disclosures.
- David: [quick recap of the four core elements of the TCFD and recommended disclosures] This is what organisations need to disclose against.
- Nadine: So why have we come together a second time to look at supporting TCFD implementation: As Michael Bloomberg so succinctly put it: “... progress must be accelerated. Today’s disclosures remain far from the scale the markets need to channel investment to sustainable and resilient solutions, opportunities, and business models. I believe in the power of transparency to spur action on climate change through market forces.” [This is no doubt that we need to accelerate the adoption of the TCFD recommendations globally and unprecedented changes are needed to meet the goals of the Paris Agreement. Given the complex nature of climate change, companies need to consider the financial risk and opportunities that climate change poses to their activities, strategy and business. Similarly, investors need decision-useful information on how companies are prepared so that they can better understand their exposure to these risks and allocate capital accordingly to support long-term sustainable, economic systems aligned with a 1.5 degrees pathway. ] What are investors getting? What could we do to move from paper to practice? How can we increase uptake at scale? How do we get better disclosures faster Only 4% make 10 of 11 recommended disclosures and 3.6 of 11 recommended disclosures are being made by organisations on average. So we have a way to go. We have this globally agreed framework, but companies not using it as intended – uptake at scale is urgently needed. So what exactly are investors asking for in terms of climate-related financial disclosures?
- David: highlight what decision useful climate information is Governance feedback: Specificity and detail around board level oversight of climate risk, including clear description of board level responsibilities, climate relevant board member qualifications Frequency and types of interactions with management around climate-related performance The use of targets to establish accountability around performance Strategy feedback: Having specific time horizons specified with respect to descriptions of the company’s strategy to mitigate risks or capture opportunities. Stronger and more clear connections to financial impacts – including company expenditures to achieve these strategies, and the long-term financial benefits resulting from them. More clarity around how companies assessed the materiality of climate-related risks to their business. Risk Management feedback Having clear definitions of the categories and specific channels of risk the companies identified in the example as material. Greater clarity around the process by which companies prioritized risks, and how this prioritization may change over time in response to actions taken by the company to mitigate these risks. More information about how a company’s risk management process informed the board’s decisions around strategic resilience. Metric and Targets feedback: How the targets set by a company relate to its strategy, and in being able to track and understand a company’s performance towards achieving the target. Historical performance data was also seen as useful. Disclosure of the calculation methodology by which metrics were reported was important for comparability. More robust normalization factors to facilitate comparability
- Nadine: So we have developed two set of tools to help build momentum and enhance the quality of climate-related financial disclosures at scale to ensure the provision of decision-useful information to the market. For a company that is looking to get started, we recommend the guide which offers practical “how to” guidance for companies on implementing the TCFD recommendations using mock disclosures. However, the purpose of today’s webinar is to demonstrate what good practice looks like from leading companies globally in implementing the TCFD recommendations. When we developed the TCFD Good Practice Handbook, we felt there was and that there is value in learning from one’s peers and how they have approached disclosures. So now if I hand back to David who will introduce the Handbook.
- David: Our handbook provides tangible real-world examples of good practices in TCFD disclosure from mainstream reports. In the following slides, I will give you a preview of the Handbook and use examples from annual reports to highlight what good practice looks like. The examples are drawn from 19 annual reports drawn from across the G20. Page 45 contains a list of the companies, geographies and TCFD sectors. Sectors covered include both financial and non-financial sectors, such as energy, materials and buildings, and transportation. There are other examples of good practices emerging which do not draw examples from the annual report. This is inconsistent with the TCFD’s recommended vehicle for disclosure and is a missed opportunity for linking financial and non-financial information as sought by investors. So now let’s look at one or two examples from each TCFD core element. Let’s begin with governance.
- Nadine: What are companies disclosing in their mainstream reports on governance? This section of the handbook presents good practice disclosures regarding those individuals, business areas and management and governance bodies within the business charged with responsibility for managing or overseeing climate-related risks and opportunities. We consider both the role of the board in overseeing climate-related issues and management‘s role in assessing and managing climate-related issues, as required under the two TCFD recommended disclosures for governance. We like this example from Canadian Mining company Barrick because it clearly states that the board has oversight of climate-related risks and opportunities, and explains the roles of the audit and board committees. The second thing it does is connect who is involved with how they manage such risks. E.g. the risk committee assists the board in overseeing the company’s management of enterprise risk. And we like that climate change is built into existing risk management processes, again as advocated by the TCFD.
- Nadine: A second example comes from the Royal Bank of Canada. There are two extracts here: The first good practice relates to board oversight and leadership. We liked that the board chair in introducing the annual report, says that climate change is the most pressing issue of our age, a message reinforced throughout Climate Week by many here in New York. The Chair then goes on to state the Board’s oversight function. The second extract at the bottom of the slide explains the functions involved, and there is good practice in linking back to performance goals on climate change for management.
- David: Let’s now look at a strategy example – Firstly, we begin by identifying good practices of companies in disclosing how they have identified which climate-related issues are relevant and material to them across different time horizons. Secondly, having identified the specific climate-related issues likely to have a material impact on the company, we then offer good practice examples where companies have fleshed out how these issues will impact on their business, strategies and financial planning. Whilst the TCFD has identified these as separate recommended disclosures, it became readily apparent when reviewing the disclosures that these two are often closely intertwined. So let’s look at some strategy disclosures from Danone. These are interesting as they cover both climate and natural capital which shows how climate can be integrated and connected to other information in the mainstream report. We like this example as it links strategy to risk management and specifically wider risk identification and management processes. It identifies mid-term risks and implications for the business. In the second example, Danone identify physical climate risks and importantly explains the impacts on its activities, operations and supplier and stakeholder relationship. Danone goes on to say how this could impact on its results and strategy. And in this example, we like how Danone have presented the description of climate risks need to their management measures.
- David – This is a second example of strategy where French utility company EDF identifies the financial risks and opportunities on its business. In the second extract the company explains in detail the impact on its assets, operations , product and service offering, value chain and financial planning and performance amongst other areas. They have considered multiple facets of the business and at an appropriate level of granularity.
- Nadine: This section of the handbook offers good-practice examples of TCFD risk management disclosures. A particular focus is on the processes for managing and determining the significance of climate-related risks and how they are embedded in existing and wider risk management processes within the business. We also consider risk classification frameworks and definitions used. For a reminder of the three TCFD recommended disclosures for risk management, see Figure 1. Note that the scope and categories of risks covered have been illustrated in the previous section providing good practices on TCFD strategy disclosures. If we look Eni’s Annual Report, it shows have its existing risk management framework has been adopted and climate risks are identified as a top strategic risk within this existing risk framework, This is consistent with the TCFD recommendation that existing processes for risk management and governance be used and adopted. There is also the good practice of considering different time horizons. We also like the fact that Eni has considered both transition and physical risks, and the processes and functions involved. This also illustrates the interconnectivity of TCFD disclosures across the four TCFD core elements.
- Nadine – A second example of risk management is drawn from HSBC – like the previous example, climate risks are considered in the context of existing risk management processes. Here they go on to explain how climate risk is considered in the context of credit risk. HSBC also identifies six higher transition risks and their respective exposure. As in the last example, this also shows the connectivity of TCFD disclosures. HSCB include climate risk in its Board approved risk management statement, illustrating the inter-relationship between risk management and board oversight. If there is one key message to take away from this webinar it is that TCFD disclosures should not be viewed in isolation. Finally, we also like the fact that HSBC is looking to expand its use of metrics and targets for the six higher transition risks and sees its disclosures are evolving over time. This is the perfect Segway back to David to share some of the good practices we surfaced on TCFD metrics and targets.
- David: The section of the handbook offers good practice examples of TCFD metrics and targets disclosures. We focus on providing examples that quantify the effectiveness of a company’s strategic responses to climate-related risks and opportunities, provide sufficient qualitative context to facilitate the user’s understanding of the financial implications of the reported performance metrics, and establish meaningful, measurable climate-related performance goals. Prudential provides disclosures of its scope 1, 2 and 3 emissions and underlying methodologies. Prudential notes where it has used independent assurance, leaving the reader with greater confidence in the robustness of the information. The establishment of clear targets with a baseline is also good reporting practice.
- David:
- Nadine: These are 7 top tips for developing and refining climate-disclosures. 1. We have found in reviewing reports that some report preparer are confused by the orientation For TCFD, we are looking at the impact of the climate on the business not the converse. 2. Disclosures are interconnected and mutually reinforcing. Ensuring the connectivity of information is key. This includes linking financial and non-financial finroamtion. 3. We found governance disclosures muddled. Explain how the board exercises its oversight function of climate risks and how this differs from managers’ roles and responsibilities. This is a distinction between climate leadership and management – both are important hence the two recommended TCFD disclosures. 4. The process for assessing materiality was often absent from disclosures. We found that beyond scope 1 and 2 emissions, climate-related disclosures differs from company to company and within industries. There are existing standards and metrics that can be used to help make your TCFD disclosures. Consider TCFD like a bunch of puzzles pieces that holistically tell your story of how you are identifying, assessing and managing climate-related risks and opportunities. The annual report is aimed principally at investors. It allows you to put climate-related information on the same level of rigour as financial information. It allows you to make key linkages there. If it is in the mainstream report it matters. Overall, we are moving along the TCFD implementation path with more companies and disclosures, let’s keep going, learning-by-doing and refining our evolving practice. Don’t let the perfect be the enemy of the good when making your climate-related financial disclosures. This is an evolving area. Now I will turn back to Katie on what next?
- Nadine: - Now that we have identified some top tips from the good practices in this year’s disclosure cycle, we would like to share with you a snapshot of the ample resources that are available to help you implement the TCFD. We suggest you start with our twin resources – the guide and handbook. We also wish to draw your attention to the Corporate Reporting Dialogue’s Better Alignment Project report (being launched tomorrow) – this will be of particular interest in the context of the 50 illustrative metrics from the TCFD and how a report preparer can use CDP, SASB or GRI metrics to make some of the quantitative disclosures suggested by the TCFD. It also shows how the five leading framework and standard setters, including SASB and CDSB are collectively aligned to the TCFD principles for effective disclosures and recommended disclosures. It provides a mapping of how we fit together in the context of climate. The World Economic Forum’s climate governance principles, our implementation guide and this good practice handbook are examples of what you will find on the TCFD Knowledge Hub. The Hub is powered by CDSB and an online aggregator for publicly available resources, events, and case studies relating to the TCFD. E-learning courses on making climate related financial disclosures were developed by CDSB and launched earlier this month. We encourage you and your colleagues to test your knowledge, and this provides an excellent introduction or refresher to climate-related financial disclosures.