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TCFD: Responding to climate-related risk

Creating value from disclosure

There has been a step change in the way governments are addressing climate change. To keep the Paris Agreement goal within reach - limiting global temperature increases to 1.5 degrees Celsius - adopting new regulatory frameworks is a crucial step forward.

As national policies are put in place to accelerate the transition to a low carbon economy, companies find themselves at the heart of this change.

Through the recommendations set out by the UK Task Force for Climate-related Disclosures (TCFD), businesses can improve the way they report climate-related risks and opportunities, and take action.

While already widely used on a voluntary basis, the UK is the first major economy to mandate the use of the TCFD framework. Forward-thinking business leaders are assessing the risks and opportunities climate change poses to their business, employees and stakeholders.

Five key questions you should be asking:

  1. Do you understand how climate change, and the subsequent policy response can financially impact your business?
  2. Are you ready to respond tactically and strategically to climate-related risks and opportunities?
  3. Do you have a defined transition plan to ensure resilience in a low-carbon economy?
  4. Have you got the right data and systems in place to monitor your progress?
  5. Are you in a position to articulate your approach to key audiences, including investors?

Why businesses need to act

Climate-related issues can be looked at from both a risk and impact lens. It’s not just the impact of a business on the environment, but the capacity for the future environment to disrupt business. We call this the “outside in” and “inside out” view.

By reporting against the TCFD framework, your business will be forced to face real, climate-related risks and opportunities. Improved understanding can help you adapt your business and pivot towards growth.

Growing pressure for better climate-related information

It’s clear investors are waking up to the risks and opportunities that climate change brings. 75% of UK investors consider a company’s exposure to ESG risks and opportunities when screening investment opportunities. A major challenge for investors is the lack of good quality climate disclosures that are useful for them to base their investment decisions on. Investors are willing to use their voting power to obtain improved information. The Climate Action 100+ initiative - an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take action on climate change - is just one example.

Existing and anticipated regulations and initiatives will impact businesses

The UK is the first major economy to mandate the use of the TCFD framework. The Government’s TCFD roadmap sets out when businesses will be required to disclose, and for many it is already mandatory.

Regulation is planned from a range of bodies to target companies across the economy, with the aim of having most UK companies within the scope of mandatory TCFD reporting by 2025.

The International Sustainability Standards Board (ISSB) has also published a consultation on two exposure drafts of proposed standards, focusing on general sustainability-related disclosure requirements and climate-related disclosure requirements. These build on the recommendations of the TCFD and other economy-wide industry sustainability reporting initiatives, such as the Sustainability Accounting Standards Board (SASB).

Pressure from civil society is mounting

Pressure on governments and industry to take action on climate change is rising.

Focused targeting on climate issues by NGOs - sometimes with support from investors - means businesses need to be robust in their climate-related reporting and associated actions.

For companies that don’t get this right, there’s a risk of damage to brand value and reputation. What’s more, climate risk is often seen as part of a company’s fiduciary responsibility.

Businesses able to move from purely compliance to a leader in climate-related issues have an opportunity to unlock future growth.

How we can help

We can help you wherever you are on your journey. Our breadth of experience, combined with our tech-enabled tools, ensure you take a proportionate approach to implementing TCFD requirements.

TCFD Scale

Find out how we can help you disclose against the TCFD framework through TCFD Scale

TCFD regulation has expanded. In addition to premium listed companies, standard listed companies and large private businesses are now required to publish disclosures as part of their annual accounts. We can help.

We know every business has different needs, so we’ve built that into our approach.

Across four workstreams, we can flex our level of support to ensure we work together effectively.

We offer three tiers of support, guiding you through relevant steps to achieve TCFD compliance. Scale 1 is an entry-point solution to quickly get you up to speed on TCFD reporting. Scale 2 offers an additional level of detail to ensure you maximise the value of your reporting. Finally, we offer bespoke programme support for more complex requirements and tailored scenario planning.

Find out more

The tools we use 

Some of these tools will be delivered through our Scale methodology (above) depending on your requirements.

TCFD Readiness Assessment Diagnostic tool

By disclosing against the TCFD framework, your business will be forced to face real, climate-related risks and opportunities. Our TCFD Readiness Assessment Diagnostic tool helps you understand the alignment of your public disclosures to the TCFD recommendations. It can be used to understand peer comparisons and show the difference in disclosures between your annual report and other public disclosures.

With a seat at the TCFD taskforce, and having helped multiple clients on their TCFD journey, we can help you:

  • Gain greater insight on your performance benchmarked against your peers; and

  • Develop strategic and tactical recommendations to position your business and address climate opportunities and risks.

Please get in touch with us, using the contact details below, to help you get started.

 

Climate Governance Maturity Framework

Following our work with the World Economic Forum (WEF), we have developed a Climate Governance Maturity Framework. This framework builds on the WEF’s Climate Governance Principles, and acts as an assessment of how well climate risks and opportunities are embedded within an organisation’s central governance framework.

It helps uncover areas where ESG governance and reporting can be improved, and equips businesses with a toolkit to assess their maturity of climate governance against each of the WEF’s eight Principles.

Taking a systematic approach, businesses can understand how well-suited their existing governance is at detecting, monitoring and managing climate change risks and opportunities, relative to the climate risk profile of the organisation.

Find out more
 

Climate Scenario Analysis

Do you know how your business might be impacted by climate-related risks, and what the financial implications are?

Scenario analysis is a useful tool for understanding the climate implications for your business. This means applying a number of possible futures to your business to test strategic resilience and management response options. First movers will be able to align their businesses with emerging growth trends.

Our proprietary climate scenario models (covering physical and transition impacts) can help you explore what climate change means for your business.  Find out more about our Physical Climate Analytics tool, powered by Jupiter Intelligence™.

Scenario analysis for financial institutions

As a financial institution, scenario analysis will require an additional lens to understand how your exposure to different sectors will be impacted from a risk and return perspective. Our climate scenario models extend to the financial sector through this additional lens. This allows the translation of financial impacts for different economic sectors into financial implications for your institution. 

Get in touch

Why choose PwC?

Having worked with clients on their TCFD requirements since the task force’s inception, we know what good looks like.

We have access to the latest updates on the TCFD with Jon Williams, PwC Partner, a member of the task force. Involved in the development of the framework, and its recommendations, we understand how to make TCFD disclosures most effective for your business.  We continue to be involved with running the public consultation and monitoring of TCFD adoption rates.

Our expert team has knowledge spanning across governance and strategy, risk and change management, technology, reporting and assurance. We combine specialist technology with our insight to deliver strong results.

Contact us

Jon Williams

Jon Williams

Partner, Global Banking & Capital Markets ESG leader and UK chair, Sustainability & Climate change, PwC United Kingdom

Tel: +44 (0)7595 609666

Leanne Bouvet

Leanne Bouvet

Assistant Director, Sustainability & Climate Change, PwC United Kingdom

Tel: +44 (0)7483 440137

Tom Loukes

Tom Loukes

Partner - Risk, PwC United Kingdom

Tel: +44 (0)7841 562165

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