Uncovering the Secrets of the Task Force on Climate-related Financial Disclosures: A Beginner’s Guide

Dec 26, 2022

Climate change is already impacting your business.

The crisis impacts all businesses, from causing damage to assets to lowering productivity.

Financial markets must be able to accurately gauge risk to understand the potential for profit gain or loss. A key part of getting risk right is that businesses disclose pertinent information, such as details of their assets and liabilities. If the risks posed by climate change are ignored, companies will be far less resilient to its impacts, while wrongly pricing assets may threaten market stability.

The financial impact of climate change

Climate change is having catastrophic effects on communities, economies, and countries around the world. The scale of the destruction will depend on our ability to decarbonise in the coming years.

Rising temperatures will render large areas uninhabitable while making food and water increasingly scarce due to drought. Other forms of extreme and unpredictable weather such as floods and storms will threaten lives and livelihoods, whilst impacting infrastructure and property and obstructing trade routes. The east coast of Australia has experienced this first hand over previous years and railway closures have impacted the west coast.

These events pose physical risks to businesses and communities around the world, and result in large financial liabilities for rebuilding property and infrastructure.  The value of property and assets will crash, household wealth and corporate profits will be significantly lower, and there will be losses in both financial and credit markets.

Businesses will also be impacted by the transition to a low-carbon economy. As governments take action, they will likely impose new forms of regulation to combat climate change. Complying will potentially require significant investment from businesses, especially those who have not started preparing in advance. Energy and mining companies are particularly vulnerable to transitional risks due to their degrading effects on the environment and high greenhouse gas emissions.

The Task Force on Climate-related Financial Disclosures

The Financial Stability Board established the Task Force on Climate-related Financial Disclosures in 2015. The task force was designed to outline the kinds of information companies should disclose about their climate risk exposures to keep investors, lenders, and insurance underwriters fully informed.

The task force’s recommendations for disclosures were split into four sections:

1. Governance – how climate-related risks and opportunities are assessed by the company’s management and overseen by the board.
2. Strategy – how the company’s strategy and financial planning may be impacted by climate-related risks and opportunities based on different climate scenarios. For example, how its supply chain will be affected?
3. Risk Management – the company’s processes to identify, assess and manage climate-related risks – both physical risks and those inherent to decarbonisation.
4. Metrics and Targets – the metrics and targets used to assess and manage relevant climate-related risks and opportunities.

Implementing the task force’s recommendations will benefit companies by enhancing their access to capital, helping them to meet existing disclosure requirements, and highlighting their climate-related risks and opportunities. On a broader scale, widespread adoption will help the financial implications of decarbonising and businesses’ impacts on climate change be better understood.

Digital tools can also be useful to open discussion on the success of various technologies, share in-progress research, and map organisations that are enacting circular principles to connect sustainably-minded customers with service providers.

How long until it is mandatory in Australia?

With the latest Budget announcement and consultation paper release, all things are lining up that climate-related disclosures will become mandatory for Australian entities in 2024. Companies should be proactive in this space to understand their exposures and start working climate-related risk management into their business processes.

Take our TCFD Maturity Assessment 

To assist Australian Businesses we recently released our TCFD Maturity Assessment. This comprehensive assessment will provide your company with an overall maturity index score against the TCFD framework and benchmark your company against other Australian businesses.

You will be provided with a personalised report for your company that provides you with crucial actions you can take immediately to manage the financial impact of climate change on your business.

This assessment is designed for:

  • Chief Financial Officers (CFOs)
  • Risk Managers
  • ESG Managers

You can undertake the TCFD Maturity Assessment now.

How we can help manage your climate risk

Evolveable Consulting can perform a suite of services to support your companies alignment with the TCFD framework, including:
• Climate Change alignment session with Company Board and Senior Management
• Climate Change Strategy and Policy development

• TCFD gap analysis and Maturity Assessments
• Climate Change Risk Assessments
• Scenario Analysis

If you would like to know more

At Evolveable Consulting, we assist businesses in identifying circular solutions and strategies to reshape their business. You can learn more about our services or book a consultation directly with us.

Share it on

Read the recent articles

Is Australia failing in the design of renewables?

Is Australia failing in the design of renewables? Traditional engineering mindsets need to change to consider the full lifecycle of materials throughout a project. With the explosion of renewable energy projects worldwide, these must be designed for circularity to...

read more