TCFD Recommendations

The TCFD is an industry-led body set up to develop recommendations for the reporting of clear, comparable and consistent information on organizations' climate-related risks and opportunities.

Established by the Financial Stability Board (FSB) in 2015, the 32-member expert group includes experts from banks, asset managers, insurers, and non-financial sectors. Michael Bloomberg, founder of Bloomberg LP, serves as chairman. In 2017, the task force released a final report with its recommendations, which as of May 2021 had attracted more than 2,000 supporters with a total market capitalization of over $22.4 trillion.

What are the TCFD recommendations?

The Task Force produced 11 recommended disclosures grouped around four thematic categories: governance, strategy, risk management, and metrics and targets. Together, they are intended to guide investor decision-making and build up a picture of how organizations assess climate-related issues.

TCFD recommendation themes: governance. strategy, risk management, & metrics & targets.


The organization's governance around climate-related risks and opportunities. TCFD recommendations ask supporters to describe their board's oversight of climate issues and management's role in assessing and managing these.


The actual and potential impacts of climate-related risks and opportunities on an organization's operations and strategy. There are three recommended disclosures under this category: supporters should describe the climate-related risks and opportunities identified over the short, medium and long term; explain the impact of these on their businesses, strategies and financial planning; and set out the resilience of their strategies in reference to different climate-related scenarios, including a 2°C or lower scenario.

Risk Management

The three recommended disclosures under this heading call on supporters to describe their processes for identifying and assessing climate-related risks; their processes for managing these risks; and how these are integrated into their overall risk management set-up.

Metrics and Targets

Recommended disclosures are: the metrics used by supporters to assess climate-related risks and opportunities in line with their strategy and risk management process; Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions; and the targets used to manage climate-related risks and opportunities, along with the organization's performance against these targets.

In an implementation guide accompanying the final recommendations, the TCFD provided supplemental guidance for the financial sector and certain non-financial industries, including energy and transportation, to capture sector-specific risks and opportunities. The task force has also published additional technical supplements on the use of scenario analysis in disclosure of climate-related risks and opportunities and on risk management integration and disclosure.

An online Knowledge Hub was also set up to help companies understand and operationalize the recommendations of the task force.

How does the TCFD define climate risks and opportunities?

A key objective of the TCFD recommendations is to clarify how the impacts of climate change translate into financial risk and opportunity.

To this end, the task force produced a consistent taxonomy of climate risks and opportunities, which allows for mutual understanding of these between reporting companies and investors. It also allows investors to compare and contrast climate risks and opportunities across organizations.

Climate risks are organized within two categories: transition risks and physical risks. Transition risks are those related to efforts to move to a lower-carbon economy. This shift will catalyze policy, legal, technology, and market changes, which in turn may inflict financial and/or reputational losses on organizations.

Physical risks are those precipitated by the changing climate itself. These can be event-driven, in the form of more severe storms, cyclones and floods, or related to longer-term shifts - like rising sea levels and higher seasonal temperatures.

TCFD recommendations ask supporters to refer to these categories in both their strategy and risk disclosures.

Climate opportunities relate to those activities that may help society mitigate and/or adapt to climate change and which also produce financial benefits for the companies that act upon them. Each organization will have its own set of such opportunities determined by their own jurisdiction, market, and sector. To provide reporting companies with a starting point, however, the TCFD identified activities focused on resource efficiency, the adoption of low-emission energy, and the spread of climate-friendly products and services as key opportunities.

The TCFD views climate-related risk and opportunity as having financial impact. Potential financial impacts are provided by the task force to help reporting companies figure out how their income statements, cash flow statements, and balance sheets may be affected by these, and to rank them by materiality.

However, uncertainty over how climate risks and opportunities will manifest over time makes quantifying such information difficult. Hence why the task force recommends organizations use historical and forward-looking scenario analysis to help ballpark these exposures.

What makes an effective TCFD report?

The task force recommends that climate-related financial information be provided in organizations' mainstream financial filings, where they have parity of esteem with other financial and accounting data. Asset owners and asset managers are also recommended to report to their beneficiaries and clients, respectively, and publicly via their websites.

In addition, the TCFD advises supporters to follow seven reporting principles outlined in its implementation guide in order to produce disclosures that are both high-quality and decision-useful.

Specifically, disclosures should: include relevant information; be specific and complete; be clear, balanced and understandable; be consistent over time; be comparable within a sector, industry or portfolio; be reliable, verifiable and objective; and be delivered on a timely basis.

These principles align with those followed by internationally-accepted accounting frameworks, and reflect the task force's intention for climate disclosures to be held to the same standards as mainstream financial reports.

Disclosures inconsistent with these principles may fail to provide stakeholders with the information they need to make appropriate risk assessments, and could prompt climate-focused investors to take remedial actions - for example, by voting against company directors in shareholder votes.

How are companies implementing TCFD?

At the FSB's request, the TCFD produced a series of status reports on the alignment of private sector companies' reporting with its recommendations.

The 2020 report showed that nearly 60% of the world's 100 largest public companies either support the TCFD recommendations, report in line with these recommendations, or both. However, it also revealed that these disclosures are primarily housed in organizations' sustainability reports, with TCFD-aligned information four times more likely to be included in these than in financial filings or annual reports.

Furthermore, only one in fifteen companies surveyed produced information on the resilience of their strategy under different climate-related scenarios, the lowest level across all the recommended disclosures.

Still, the task force recognizes that climate disclosure is a journey, not a one-time event. Broad uptake of its recommendations will take time, it conceded, as will disclosure of more complete, comparable and consistent climate information at the organization level.

It is likely, however, that TCFD adoption rates and disclosure quality will increase rapidly in response to governments' adoption of the recommendations in climate-related legislation. Statutory disclosure requirements have already been introduced in New Zealand and the UK. TCFD recommendations are also being incorporated into rules or guidance issued by regulators in the European Union, Australia and Canada, among other jurisdictions.

Non-governmental organizations are spurring TCFD alignment, too. CDP, a not-for-profit charity that runs a global disclosure system for environmental data with over 2,400 companies, has incorporated TCFD recommendations in its annual questionnaires. TCFD is also being used as the foundation for a global sustainability reporting framework in development at the International Financial Reporting Standards Foundation. Other voluntary ESG and climate-focused reporting frameworks, like that developed by the Climate Disclosure Standards Board, draw on the recommendations as well.

How do investors use information from TCFD disclosures?

Climate-focused financial institutions are using TCFD reports to shine a light on the climate risks faced by their portfolio companies, and integrating these findings with their existing risk management and mitigation processes.

Insights from TCFD reports are also being used as a launchpad for investor-investee engagements focused on minimising climate risks and maximising opportunities. Institutions committed to aligning their portfolios with the Paris Agreement or net-zero emissions goals are drawing on data surfaced by the TCFD on their investees' GHG emissions and climate targets to plan their decarbonization trajectories, too.

Climate-related information unearthed through the TCFD may also be used to prompt shareholder activism. BlackRock, the world's largest asset manager, has said it may vote against company boards where corporate disclosures do not provide a credible plan to shift their business models to a low-carbon future.

TCFD disclosure could influence capital flows, too. Effective TCFD reports give investors an improved understanding of companies' climate risks, which in turn can be used to inform the pricing of the instruments tied to them in financial markets. Those identified as highly exposed to climate risks may face elevated funding costs and even divestment.

Manifest's SaaS platform expedites TCFD reporting

The TCFD recommendations represent the gold-standard in climate-related reporting, as evidenced by their adoption by NGOs, regulatory authorities, and governments alike. A vibrant information ecosystem on climate risk, opportunity and reporting has also flourished as the recommendations have grown in popularity, of which Manifest Climate is a proud part. To learn more on how our firm can assist with your TCFD journey, click here.