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TCFD Report: Encouraging Climate-related Financial Disclosures, But Still a Long Way to Go

Updated: Aug 2, 2023

The TCFD 2022 status report is out, which details the gradual rise in financial disclosures related to climate change since 2017. While climate change poses serious threats to global economies, better disclosures are imperative to make better and more informed decisions for capital and resource allocation.

Comprehensive disclosures to improve and increase reporting on climate-related information reinforce risk assessment and strategic planning via better evaluation of risks and exposures over the short, medium, and long term; they further support identifying risks & opportunities presented by intensifying climate extremes, emerging technologies (e.g. geospatial technologies integrated with AI and machine learning), and climate-related policies.

While the TCFD 2022 status report outlines progressive signs in terms of companies’ climate-related disclosures, it stresses an urgent need to improve transparency—particularly in the context of global focus on climate change.

Take-home-messages from the report:

· Around 80% of companies disclosed climate risk-related information aligned with at least one of the eleven recommended disclosures under the TCFD framework.

· Only 40% of the companies disclosed in alignment with at least five recommendations and just 4% disclosed in line with all 11 recommended disclosures under the TCFD framework.

· Since the launch of TCFD in 2017, all the regions witnessed a significant increase in terms of their level of disclosures.

· Europe remains the market leader with ~60% average disclosure across all 11 recommendations—24% higher than the second-in-place region (Asia Pacific). Similarly, other regions, such as North America also experienced growth in terms of average disclosure with a growth of 12 per cent points.

· While the companies did a great job to disclose recommendations regarding Strategy and Risk Management (TCFD recommendations), Governance remained the least disclosed TCFD recommendation with two of its sub-recommendations being the 2nd and 3rd least disclosed among the total 11 recommendations.

· Within the Strategy recommendation, companies’ resilience under different climate scenarios was also among the least disclosed across the total 11 recommendations (only 16% provided resilience disclosure).

· Companies in the energy, materials & buildings, banks, and insurance sectors now have >40% average disclosure levels across all the recommendations with 43, 42, 41, and 41% average disclosures, respectively.

TCFD-aligned disclosures chart
TCFD-aligned disclosures

Among ~3,800 TCFD supporting organizations globally, around 1,500 (~40%) are financial institutions, which are responsible for US $ 217 trillion worth of assets. The supporters of TCFD are now spread across 99 countries with coverage of almost all economic sectors. Given its steadily increasing acceptance around the world, TCFD-aligned disclosures are becoming a must in different parts of the world.

With its advanced capabilities in terms of physical and transitional risks, Intensel can not only provide insights to improve the existing TCFD reporting mechanisms of corporations but also provide a road map to recent companies to report climate-related financial information aligned with a maximum number of recommendations under TCFD framework.


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