The Financial Stability Board established the Task Force on Climate-related Financial Disclosures in December 2015 with a clear aim - “to develop voluntary, consistent climate-related financial disclosures that would be useful to investors, lenders and insurance underwriters in understanding material risks”.
With no standardised framework set out to measure climate-related financial disclosures, it becomes difficult to draw comparisons between companies and to get a look at the bigger picture. Having defined metrics and information allows for a review of the potential financial implications of climate change.
The report from the Task Force provides recommendations for a framework around four clear sections: Governance, Strategy, Risk management and Metrics and Targets and provides recommended disclosures for each section.
A key tool recommended by the task force is the use of ‘Scenario Analysis’. This is where organisations will use different climate-related scenarios, including the 2℃ limit, to assess the impact against their business. It allows for companies to explore potential outcomes and how they may play out over the longer term.
The conclusions drawn from the report allow for immediate and flexible adoption. The Force expects the reporting of climate-related risks and opportunities will develop over time as stakeholders contribute to the consistency and the quality of disclosed information. The report is now in a phase of public consultation with the final report due for publication in June 2017. You can read the full report here.