On Dec. 14, 2016, the Task Force on Climate-related Financial Disclosures issued an extensive report setting forth its recommendations for helping businesses disclose climate-related financial risks and opportunities. The Task Force was established in 2015 by the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, with the mandate to develop voluntary, consistent climate-related financial disclosures that would be useful to investors and others in understanding material risks.
The Task Force’s report includes recommendations tied to four thematic areas – governance, strategy, risk management, and metrics and targets – which it believes should be implemented by all organizations that have public debt or equity outstanding. The general recommendations for applicable organizations are as follows:
- Governance – Disclosure of their governance related to climate-related risks and opportunities, including the board of director’s oversight, and management’s role in assessment and management, of such risks and opportunities.
- Strategy – Disclosure of actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning. Among other things, the Task Force recommends a description of the potential impact of different climate change scenarios, including the effect of a two degree Celsius increase in global average temperatures above pre-industrial levels.
- Risk Management – Disclosure of the organization’s processes for identifying, assessing, and managing climate-related risks, and how these processes are integrated into the organization’s overall risk management.
- Metrics and Targets – Disclosure of the metrics and targets used by the organization to assess and manage climate-related risks and opportunities.
The Task Force recommendations are now subject to a 60-day consultation period that ends February 12. The final Task Force recommendations are to be presented to G20 leaders prior to their July summit in Hamburg, Germany. The Financial Stability Board has encouraged the Task Force to monitor and report on industry adoption of its final recommendations.