What is the TCFD?
- Governance: Disclosure on the organisation’s governance around climate-related risks and opportunities.
- Strategy: Disclosure on the actual and potential impacts of climate-related risks and opportunities on the organisation's business strategy and financial planning.
- Risk Management: Disclosure on the process used by the organisation to identify, assess and manage climate-related risks.
- Metrics and Targets: Disclosure on the organisation’s metrics and targets used to assess and manage relevant climate-related risks and opportunities.
The Use of Scenario Analysis
Among all disclosure requirements, scenario analysis is vital for organisations in their strategic planning processes to assess the financial impact of climate change. It allows organisations to consider a broader range of assumptions, uncertainties, and potential future states.
However, it is a complex quantitative analysis that poses a challenge for disclosing the resilience of an organisation's strategy. The Task Force recognises that organisations have different levels of experience with scenario analysis and offers guidance for beginners and experienced organisations.
For beginners, the Task Force suggests starting with qualitative scenario narratives or storylines to help management explore the potential range of climate change implications.
As organisations gain experience, they can use quantitative information to illustrate potential outcomes.
For experienced organisations, greater rigour and sophistication in the use of data sets and quantitative models may be necessary. Quantitative approaches can be achieved by using external scenarios and models (e.g., those provided by third-party providers) or developing in-house modelling capabilities.
The Integration of
Integrating TCFD Recommendations in the company requires educating the Board and senior management about TCFD and its implications for stakeholders. Agreements on the scenarios must be set to translate the company's purpose into behaviours, practices, and processes while ensuring board support.
Incorporate the TCFD framework into core business and operations, with metrics and targets defined for corporate resilience under climate uncertainties. TCFD disclosure can lead to better resource allocation and management by changing the board and steering group's mindset.
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