Bloomberg’s taskforce presents first guidelines for disclosure of climate-related financial risk

The taskforce led by Michael Bloomberg to promote more effective climate-risk disclosures on Wednesday (Dec. 14) issued a set of recommendations for “voluntary, decision-useful, climate-related disclosures to be made as part of mainstream financial filings”.

The TCFD (Task Force on Climate-related Financial Disclosures) Recommendation report is the result of the first global, industry-led effort to shape common guidelines and standards for climate-related financial disclosures and is aimed at helping organizations identify and disclose information needed by investors, lenders, and insurance underwriters to appropriately assess and price climate-related risks and opportunities.

In an op-ed published on the Guardian, TCFD Chairman Michael Bloomberg explained that “investors currently don’t have the information they need to respond” to the developments triggered by climate change. “Without the necessary information, market adjustments to climate change will be incomplete, late and potentially destabilizing”.

According to the report, many of the existing disclosure standards focus on climate-related information, such as GHG emissions and other sustainability metrics. Investors and operators commonly cite the lack of information on the financial implications around the climate-related aspects of an organization’s business as a key gap.

“We believe that financial disclosure is essential to a market-based solution to climate change. A properly functioning market will price in the risks associated with climate change and reward firms that mitigate them. As its impact becomes more commonplace and public policy responses more active, climate change has become a material risk that isn’t properly disclosed”, Bloomberg said.

The Task Force developed recommendations that are applicable to organizations across sectors and jurisdictions, concerning aspects of governance, strategy, risk management, metrics and targets.

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The Task Force on Climate-related Financial Disclosures (TCFD) was established in December 2015 by the Financial Stability Board (FSB) with the assignment of developing “voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders”. Its first report was published in April, setting out the objectives for TCFD’s work and a set of fundamental principles of disclosure.

All taskforce members, companies with market capitalisation of USD 1.5tn and financial institutions responsible for assets of USD 20tn, have announced their support for the disclosure recommendations, that are open for public consultation until 12 February 2017.

In the official release, Bloomberg highlighted that the report “represents an important effort by the private sector to improve transparency around climate-related financial risks and opportunities”. “Climate change is not only an environmental problem, but a business one as well”, he said. “We need business leaders to join us to help spread these recommendations across their industries in order to help make markets more efficient and economies more stable, resilient, and sustainable.”

 

(Image: Michael Bloomber, 2009. Photo credit: Azi Paybarah/Flickr)