Task Force on

Climate-related
Financial Disclosures
Implementing the Recommendations
of the Task Force on Climate-related
Financial Disclosures

This document updates and supersedes the 2017 Annex “Implementing the
Recommendations of the Task Force on Climate-related Financial Disclosures”

October 2021

Recommendations of the Task Force on Climate-related Financial Disclosure i

Contents
A. Introduction................................................................................................................................................... 3
1. Background ................................................................................................................................................................... 3
2. Structure of Recommendations .................................................................................................................................. 6
3. Application of Recommendations .............................................................................................................................. 7
4. Assessing Financial Impacts of Climate-Related Risks and Opportunities ............................................................ 9
5. Summary of Additional Supporting Materials ......................................................................................................... 12

B. Recommendations ..................................................................................................................................... 14

C. Guidance for All Sectors ............................................................................................................................ 17

1. Governance ................................................................................................................................................................. 17
2. Strategy ........................................................................................................................................................................ 18
3. Risk Management ....................................................................................................................................................... 20
4. Metrics and Targets .................................................................................................................................................... 21

D. Supplemental Guidance for the Financial Sector .................................................................................. 24

1. Banks ............................................................................................................................................................................ 25
2. Insurance Companies................................................................................................................................................. 31
3. Asset Owners .............................................................................................................................................................. 37
4. Asset Managers ........................................................................................................................................................... 44
5. Carbon Footprinting and Exposure Metrics ............................................................................................................ 50

E. Supplemental Guidance for Non-Financial Groups ............................................................................... 56

1. Energy Group .............................................................................................................................................................. 63
2. Transportation Group ................................................................................................................................................ 65
3. Materials and Buildings Group ................................................................................................................................. 66
4. Agriculture, Food, and Forest Products Group ....................................................................................................... 67

F. Fundamental Principles for Effective Disclosure .................................................................................... 70

Appendix 1: Climate-Related Risks, Opportunities, and Financial Impacts.............................................. 74

Appendix 2: Cross-Industry, Climate-Related Metric Categories .............................................................. 79

Appendix 3: Glossary and Abbreviations...................................................................................................... 82

Appendix 4: References .................................................................................................................................. 85

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures i

 A.
Introduction

A.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 2

 A. Introduction

1. Background
In December 2015, the Financial Stability Board (FSB) established the industry-led Task Force on
Climate-related Financial Disclosures (TCFD or Task Force) to develop climate-related disclosures that
“could promote more informed investment, credit [or lending], and insurance underwriting decisions”
and, in turn, “would enable stakeholders to understand better the concentrations of carbon-related
assets in the financial sector and the financial system’s exposures to climate-related risks.”1, 2

To fulfill its remit, the Task Force developed a framework with four widely adoptable recommendations
on climate-related financial disclosures applicable to organizations across sectors and industries, as
described in the Task Force’s report—Recommendations of the Task Force on Climate-related Financial
Disclosures (2017 report). The Task Force’s 2017 report reflects its consideration of public feedback
received throughout 2016 and 2017. The Task Force solicited this feedback in several ways, including
two public consultations, resulting in over 500 responses, hundreds of industry interviews, several
A.
Introduction
focus groups, and multiple webinars.

B. An important aspect of the Task Force’s recommendations is their inclusion in organizations’

Recommendations mainstream (i.e., public) annual financial filings. In most G20 jurisdictions, public companies have a
legal obligation to disclose material information in their financial filings—including material climate-
C.
related information. The Task Force believes climate-related risks and opportunities are or could be
Guidance for All Sectors
material for many organizations; and its report and this Annex should be useful to organizations in
D. complying with existing disclosure obligations more effectively. Furthermore, the Task Force
Supplemental Guidance encourages organizations for which climate-related risks and opportunities could be material in the
for the Financial Sector
future to begin disclosing climate-related financial information outside financial filings to facilitate the
E. incorporation of such information into financial filings once climate-related issues are determined to
Supplemental Guidance be material.
for Non-Financial Groups
This Annex contains the following information:
F.
Fundamental Principles ▪ directions on the application of the recommendations, including materiality assessments and
for Effective Disclosure
location of disclosures;
Appendices ▪ information on assessing financial impacts of climate-related risks and opportunities
(collectively referred to as climate-related issues);

▪ recommendations and supporting recommended disclosures that describe information

investors, lenders, and insurance underwriters need to make economic decisions;

▪ guidance that provides context and suggestions for implementing the recommendations;
▪ supplemental guidance that highlights important considerations for the financial sector and
non-financial industries potentially most affected by climate change; and

▪ seven principles for effective disclosure developed by the Task Force to help guide current and
future developments in climate-related financial reporting.3

1
FSB, “Proposal for a Disclosure Task Force on Climate-Related Risks,” November 9, 2015.
2
The term “carbon-related assets” is not well defined, but is generally considered to refer to assets or organizations with relatively high direct
or indirect GHG emissions.
3
When used by organizations in preparing their climate-related financial disclosures, these principles can help achieve high-quality and
decision-useful disclosures that enable users to understand the impact of climate-related risks and opportunities on organizations. The Task
Force encourages organizations adopting its recommendations to consider these principles as they develop their climate-related financial
disclosures.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 3

 Since the Task Force issued its recommendations on climate-related financial disclosures in 2017, it
has monitored and promoted organizations’ adoption of the recommendations. As part of those
efforts, it has issued annual status reports describing disclosure practices related to core elements of
the TCFD recommendations along with additional information on specific topics to support
organizations in implementing the recommendations and disclosing decision-useful climate-related
financial information.4

In addition, the Task Force has issued other materials on specific topics intended to support
implementation, as described in Section A.5. Summary of Additional Supporting Materials. The Task
Force updated this Annex to incorporate content from and references to these additional publications
to reflect the evolution of disclosure practices and better support organizations’ implementation
efforts. The substantive updates to the Annex are summarized in Table 1. The Task Force has not
modified its four overarching recommendations on Governance, Strategy, Risk Management, and
Metrics and Targets or the 11 associated recommended disclosures; however, it has updated the
guidance for all sectors and now asks organizations to disclose their GHG emissions independent of a
materiality assessment. Importantly, the Task Force recognizes organizations may need time to
A. implement some of these changes, especially in areas where methodologies are being developed or
Introduction
refined and data availability is limited.
B.
Recommendations Table 1

C. Summary of Changes to Guidance, October 2021

Guidance for All Sectors
Recommendation Location Summary of Change
D. Governance: no changes
Supplemental Guidance
for the Financial Sector
Strategy
a) Describe the climate-related Supplemental For purposes of reporting on exposure to
E. risks and opportunities the Guidance for carbon-related assets, expanded the
Supplemental Guidance organization has identified over Banks suggested definition of such assets to include
for Non-Financial Groups the short, medium, and long all non-financial groups identified by the
term. TCFD in its 2017 report.5
F.
Fundamental Principles b) Describe the impact of climate- Guidance for All Revised to more explicitly address disclosure
for Effective Disclosure related risks and opportunities Sectors of actual financial impacts on organizations
on the organization’s as well as key information from
Appendices businesses, strategy, and organizations’ plans for transitioning to a low-
financial planning. carbon economy (transition plans).
c) Describe the resilience of the Guidance for All Revised to more explicitly address disclosure
organization’s strategy, taking Sectors of potential financial impacts on
into consideration different organizations.
climate-related scenarios,
including a 2°C or lower
scenario.
Risk Management: no changes
Metrics and Targets
a) Disclose the metrics used by Guidance for All Revised to more explicitly address disclosure of
the organization to assess Sectors metrics consistent with cross-industry, climate-
climate-related risks and related metric categories (Appendix 2) for current,
opportunities in line with its historical, and future periods, where appropriate.
strategy and risk management
process.

4
For more information, see the Task Force’s annual status reports (2021 Status Report, 2020 Status Report, 2019 Status Report, and 2018
Status Report.
5
In its 2017 report and annex, the Task Force did not specifically define the term carbon-related assets. Instead, in the supplemental guidance
for banks, the Task Force suggested that for purposes of disclosing information on significant concentrations of credit exposure to carbon-
related assets under the TCFD framework, banks should use a consistent definition to support comparability. The Task Force suggested using
assets tied to the energy and utilities sectors.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 4

 Table 1
Summary of Changes to Guidance, October 2021 (continued)
Recommendation Location Summary of Change
Metrics and Targets
a) Disclose the metrics used by Supplemental ‒ Added disclosure of the extent to which lending
the organization to assess Guidance for and other financial intermediary business activities
climate-related risks and Banks are aligned with a well below 2°C scenario.
opportunities in line with its
Supplemental Added disclosure of the extent to which insurance
strategy and risk management
Guidance for underwriting activities are aligned with a well
process.
Insurance below 2°C scenario.
Companies
Supplemental Added disclosure of the extent to which assets they
Guidance for Asset own and funds and investment strategies, where
Owners relevant, are aligned with a well below 2°C
scenario.6
A. Supplemental Added disclosure of the extent to which assets
Introduction Guidance for Asset under management and products and investment
Managers strategies, where relevant, are aligned with a well
B. below 2°C scenario.7
Recommendations
b) Disclose Scope 1, Scope 2, and, Guidance for All ▪ Revised disclosure of Scope 1 and Scope 2
if appropriate, Scope 3 Sectors GHG emissions to be independent of a
C.
greenhouse gas (GHG) materiality assessment.
Guidance for All Sectors
emissions, and the related risks ▪ Revised to encourage disclosure of Scope
D. 3 GHG emissions.
Supplemental Guidance
Supplemental Added disclosure of GHG emissions for lending
for the Financial Sector
Guidance for and other financial intermediary business activities,
Banks where data and methodologies allow.
E.
Supplemental Guidance
for Non-Financial Groups Supplemental Added disclosure of weighted average carbon
Guidance for intensity or GHG emissions associated with
F. Insurance commercial property and specialty lines of
Fundamental Principles Companies business, where data and methodologies allow.
for Effective Disclosure
Supplemental Added disclosure of GHG emissions for assets they
Appendices Guidance for own, where data and methodologies allow.
Asset Owners
Supplemental Added disclosure of GHG emissions for assets
Guidance for under management, where data and
Asset methodologies allow.
Managers
c) Describe the targets used by the Guidance for All ▪ Added disclosure of targets consistent
organization to manage Sectors with cross-industry, climate-related metric
climate-related risks and categories (see Appendix 2), where
opportunities and performance relevant.
against targets. ▪ Added disclosure of interim targets, where
available, for organizations disclosing
medium-term or long-term targets.

6
While the Task Force’s supplemental guidance for asset owners addresses considerations when reporting to beneficiaries, the Task Force
believes an asset owners’ disclosure of the extent to which the assets they own are aligned with a well below 2°C scenario may also be of
interest to a wider range of stakeholders. As such, the Task Force encourages asset owners to disclose this information publicly, where
appropriate.
7
While the Task Force’s supplemental guidance for asset managers addresses considerations when reporting to clients, the Task Force believes
an asset managers’ disclosure of the extent to which their assets under management are aligned with a well below 2°C scenario may also be
of interest to a wider range of stakeholders. As such, the Task Force encourages asset managers to disclose this information publicly, where
appropriate.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 5

 In addition to changes to the guidance, the Task Force made a few additional changes throughout this
document including the following:
▪ Updated Section A.3. Application of Recommendations to encourage all organizations to
disclose Scope 1 and Scope 2 GHG emissions independent of an assessment of materiality.8
The disclosure of Scope 3 GHG emissions is subject to materiality; however, the Task Force
encourages organizations to disclose such emissions.
▪ Removed tables on alignment of the recommendations with other frameworks, as they were
originally included primarily to demonstrate the Task Force’s use of existing disclosure
frameworks in developing its recommendations.9 Since 2017, many climate-related disclosure
regimes have aligned with the TCFD recommendations and generally indicate within their
frameworks where such alignment exists.
▪ Removed the illustrative examples of metrics for the four non-financial groups, as work by
other frameworks and standard setters provide more detailed guidance on sector-specific
metrics and are updated on a regular basis.

A.
Introduction 2. Structure of Recommendations
B.
The Task Force developed four widely adoptable recommendations that are supported by key climate-
Recommendations related financial disclosures—referred to as recommended disclosures. In addition, there is guidance
to support all organizations in developing disclosures consistent with the recommendations as well as
C. supplemental guidance for specific sectors and industries. This structure is depicted in Figure 1.
Guidance for All Sectors

D. Figure 1
Supplemental Guidance
for the Financial Sector Recommendations and Guidance
Recommendations
E.
Four widely adoptable recommendations tied to
Supplemental Guidance
governance, strategy, risk management, and metrics and
for Non-Financial Groups
Recommendations targets

F. Recommended Disclosures
Fundamental Principles Specific recommended disclosures organizations should
for Effective Disclosure include in their financial filings to provide decision-useful
information
Appendices Guidance for All Sectors
Guidance for All
Guidance providing context and suggestions for
Sectors
implementing the recommended disclosures for all
Recommended organizations
Disclosures Supplemental Guidance for Certain Sectors
Guidance highlighting important considerations for certain
Supplemental sectors in providing sector- or industry-specific climate-
Guidance for related financial information
Certain Sectors Supplemental guidance is provided for the financial sector
and for non-financial sectors potentially most affected by
climate change
Additional Supporting Materials
Additional Supporting Materials Additional information and guidance to help preparers
implement key components of the TCFD recommendations

8
While the Task Force agreed that organizations should disclose Scope 1 and 2 GHG emissions independent of a materiality assessment, a few
Task Force members preferred keeping such disclosures as subject to materiality.
9
When the FSB created the Task Force, it indicated the Task Force “should not add to the already well developed body of existing disclosure
schemes” (FSB, “Proposal for a Disclosure Task Force on Climate-Related Risks,” November 9, 2015). In response, the Task Force drew from
existing climate-related disclosure and other frameworks where possible and appropriate, including ones developed by the Asset Owner
Disclosure Project, CDP, Climate Disclosure Standards Board, ClimateWise, Enhanced Disclosures Task Force, G20/Organisation for Economic
Co-operation and Development, Global Reporting Initiative, International Integrated Reporting Council, Principles for Responsible Investment,
Sustainability Accounting Standards Board, and United Nations Environment Programme Finance Initiative.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 6

 The Task Force developed supplemental guidance to assist preparers in the financial sector and non-
financial industries potentially most affected by climate change and the transition to a low-carbon
economy (referred to as non-financial groups). Figure 2 shows the recommendations (Governance,
Strategy, Risk Management, and Metrics and Targets) and recommended disclosures (a, b, c) for which
supplemental guidance was developed for the financial sector and four non-financial groups. In
addition, the Task Force developed additional supporting materials to help preparers implement key
components of the TCFD recommendations. Section A.5. Summary of Additional Supporting Materials
provides more details.

Figure 2
Supplemental Guidance for Financial Sector and Non-Financial Groups
Risk Metrics and
Governance Strategy
Management Targets
Industries and Groups a) b) a) b) c) a) b) c) a) b) c)

Banks
A.
Financial

Introduction
Insurance Companies

B. Asset Owners
Recommendations
Asset Managers
C.
Guidance for All Sectors Energy
Non-Financial

D.
Transportation
Supplemental Guidance
Materials and Buildings
for the Financial Sector
Ag, Food, and Forest
E. Products
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles 3. Application of Recommendations
for Effective Disclosure

a. Who should disclose?

Appendices
To promote more informed investing, lending, and insurance underwriting decisions, the Task Force
recommends all financial and non-financial organizations with public debt or equity implement its
recommendations. Because climate-related risks and opportunities are relevant for organizations
across all sectors, the Task Force encourages all organizations to implement these recommendations.
In addition, the Task Force believes that asset managers and asset owners, including public- and
private-sector pension plans, endowments, and foundations, should implement its recommendations.

b. Which recommendations involve an assessment of materiality?

The disclosures related to the Strategy and Metrics and Targets recommendations involve an
assessment of materiality, with the exception of Scope 1 and Scope 2 GHG emissions under the Metrics
and Targets recommendation. The Task Force believes all organizations should disclose absolute Scope
1 and Scope 2 GHG emissions independent of a materiality assessment. The disclosure of Scope 3 GHG
emissions is subject to materiality; however, the Task Force encourages organizations to disclose such
emissions.

c. Where should preparers disclose?

Preparers of climate-related financial disclosures should provide such disclosures in their mainstream
(i.e., public) annual financial filings.10 Certain organizations—those in the four non-financial groups that

10
Financial filings refer to the annual reporting packages in which organizations are required to deliver their audited financial results under the
corporate, compliance, or securities laws of the jurisdictions in which they operate.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 7

 have more than one billion U.S. dollar equivalent (USDE) in annual revenue—should consider disclosing
information related to the Strategy and Metrics and Targets recommendations in other reports when
the information is not deemed material and not included in financial filings.11 Other reports include
official company reports that are issued at least annually, widely distributed and available to investors
and others, and subject to internal governance processes that are the same or substantially similar to
those used for financial reporting.

Asset owners and asset managers should report to their beneficiaries and clients, respectively, through
existing means of financial reporting, when relevant and feasible. Asset owners and asset managers
are also encouraged to disclose publicly via their websites or other public avenues of disclosure.

d. How should material information be determined?

Organizations should determine materiality for climate-related issues consistent with how they
determine the materiality of other information included in their annual financial filings. The Task Force
cautions organizations against prematurely concluding that climate-related risks and opportunities are
not material based on perceptions of the longer-term nature of some climate-related risks.
A.
Introduction
When providing disclosures outside mainstream financial filings, asset managers and asset owners
should consider materiality in the context of their respective mandates and investment performance for
B. clients and beneficiaries.
Recommendations

e. Who should review climate-related financial disclosures prior to release?

C.
Guidance for All Sectors Because these disclosures should be included in mainstream financial filings, the governance
processes should be as rigorous as those used for existing public financial disclosures, including review
D. by the chief financial officer, audit committee, and Board of Directors, as appropriate. Organizations
Supplemental Guidance
that provide climate-related financial disclosures in reports other than financial filings should follow
for the Financial Sector
internal governance processes that are the same or similar to those used for financial reporting.
E.
Supplemental Guidance f. What should preparers do if they choose to omit a recommended disclosure?
for Non-Financial Groups
If a recommended disclosure is not made, preparers should provide their rationale for omitting the
F.
disclosure.
Fundamental Principles
for Effective Disclosure g. What reporting period should preparers use?
Preparers should report information for the same period covered by their mainstream financial filings.
Appendices

h. How should preparers define short, medium, and long term?

The Task Force is not specifying time frames for short, medium, and long term given that the timing of
climate-related impacts on businesses will vary. Instead, the Task Force recommends preparers define
time frames according to the life of their assets, the profile of the climate-related risks they face, and
the sectors and geographies in which they operate.12

i. What if certain disclosures are incompatible with national disclosure requirements?

Organizations need to make financial disclosures in accordance with their national disclosure
requirements. If certain elements of the recommendations are incompatible with national disclosure
requirements for financial filings, organizations are encouraged to disclose those elements through
other reports.

11
The Task Force chose a one billion USDE annual revenue threshold because it captures organizations responsible for over 90 percent of Scope
1 and 2 GHG emissions in the industries represented by the four non-financial groups (about 2,250 organizations out of roughly 15,000).
12
2030 and 2050 have become key target dates for addressing climate change following the publication of the Special Report on Global Warming
of 1.5°C by the Intergovernmental Panel on Climate Change (IPCC). This report noted that to limit global warming to 1.5°C “global net human-
caused emissions of carbon dioxide (CO2) would need to fall by about 45 percent from 2010 levels by 2030, reaching ‘net zero’ around 2050.”

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 8

 4. Assessing Financial Impacts of Climate-Related Risks and Opportunities
While climate change affects nearly all economic sectors, the level of exposure and the impact of
climate-related risks differ by sector, industry, geography, and organization. Furthermore, the financial
impacts of climate-related issues on organizations are not always clear or direct, and, for many
organizations, identifying the issues, assessing potential impacts, and ensuring the material issues are
reflected in financial filings may be challenging. Key reasons for this are likely because of (1) limited
knowledge of climate-related issues within organizations, which may inhibit the identification of such
risks; (2) the tendency to focus mainly on near-term risks without paying adequate attention to risks
that may arise in the longer term; and (3) the difficulty in quantifying climate-related risks.13

Better disclosure of the financial impacts of climate-related risks and opportunities on an organization
is a key goal of the Task Force’s work. In order to make more informed financial decisions, investors,
lenders, and insurance underwriters need to understand how climate-related issues affect and are likely
to affect an organization’s future financial performance and position as reflected in its income
statement, cash flow statement, and balance sheet.

A. Fundamentally, the financial impacts of climate-related issues on an organization are driven by the
Introduction
specific climate-related risks and opportunities to which the organization is exposed and its strategic
B. and risk management decisions on seizing those opportunities and managing those risks (i.e., accept,
Recommendations avoid, pursue, reduce, or share/transfer).14 Once an organization assesses its climate-related issues
and determines its response to those issues, it can then consider actual and potential financial impacts
C.
on revenues, expenditures, assets and liabilities, and capital and financing. Figure 3 outlines the main
Guidance for All Sectors
climate-related risks (transition and physical) and opportunities organizations should consider as part
D. of their strategic planning or risk management to determine potential financial implications. In
Supplemental Guidance addition, Appendix 1 provides tables with examples of (1) climate-related risks and their potential
for the Financial Sector
financial impacts and (2) climate-related opportunities and their potential financial impacts.
E.
Supplemental Guidance
for Non-Financial Groups Figure 3

F.
Climate-Related Risks, Opportunities, and Financial Impact
Fundamental Principles
Transition Risks
for Effective Disclosure Opportunities
Policy and Legal
Resource Efficiency
Appendices Technology
Energy Source
Market
Risks Opportunities Products/Services
Reputation
Markets
Physical Risks
Strategic Planning Resilience
Acute
Risk Management
Chronic

Financial Impact

Revenues Income Cash Flow Balance Assets & Liabilities

Expenditures Statement Statement Sheet Capital & Financing

Climate-related issues can affect several important aspects of an organization’s financial performance
and position, both now and in the future. For example, climate-related issues may have implications
for an organization’s businesses and capital expenditures. In turn, capital expenditures will determine
the nature and amount of long-lived assets and the proportion of debt and equity to be funded on an

13
World Business Council for Sustainable Development, Sustainability and enterprise risk management: The first step towards integration, January
18, 2017.
14
For more information see TCFD, Guidance on Risk Management Integration and Disclosure, October 2020.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 9

 organization’s balance sheet. Climate-related issues may also carry implications for future cash flows
(operating, investing, and financing activities). An organization, therefore, should consider how climate-
related issues affect its current financial position and may potentially affect its future financial
positions in terms of four major categories of financial impact, as described in Figure 4.

Figure 4
Major Categories of Financial Impact
Financial Performance15 Financial Position16
Revenues. Transition and physical risks may affect Assets and Liabilities. Supply and demand changes
demand for products and services. Organizations from changes in policies, technology, and market
should consider the potential impact on revenues and dynamics related to climate change could affect the
identify potential opportunities for enhancing or valuation of organizations’ assets and liabilities. Use of
developing new revenues. In particular, given the long-lived assets and, where relevant, reserves may
emergence and likely growth of carbon pricing as a be affected by climate-related issues. It is important
mechanism to regulate emissions, it is important for for organizations to provide an indication of the
affected industries to consider the potential impacts potential impact on their assets and liabilities,
A. of such pricing on business revenues. especially long-lived assets. This should focus on
Introduction Expenditures. An organization’s response to climate- existing and committed future activities and decisions
related risks and opportunities may depend, in part, requiring new investment, restructuring, write-downs,
B.
on the organization’s cost structure. Lower-cost or impairment.
Recommendations
suppliers may be more resilient to changes in cost Capital and Financing. Climate-related risks and
resulting from climate-related issues and more opportunities may change the profile of an
C.
flexible in their ability to address such issues. By organization's debt and equity structure, either by
Guidance for All Sectors
providing an indication of their cost structure and increasing debt levels to compensate for reduced
flexibility to adapt, organizations can better inform operating cash flows or for new capital expenditures
D.
investors about their investment potential. or research and development (R&D). It may also affect
Supplemental Guidance
for the Financial Sector It is also helpful for investors to understand capital the ability to raise new debt or refinance existing debt,
expenditure plans and the level of debt or equity or reduce the tenor of borrowing available to the
E. needed to fund these plans. The resilience of such organization. There could also be changes to capital
Supplemental Guidance plans should be considered bearing in mind and reserves from operating losses, asset write-
for Non-Financial Groups organizations’ flexibility to shift capital and the downs, or the need to raise new equity to meet
willingness of capital markets to fund organizations investment.
F. exposed to significant levels of climate-related risks.
Fundamental Principles Transparency of these plans may provide greater
for Effective Disclosure
access to capital markets or improved financing
terms.
Appendices

Whether an individual organization is or may be affected financially by climate-related issues usually

depends on:

▪ the organization’s exposure to, and anticipated effects of, specific climate-related risks and
opportunities;

▪ the organization’s planned responses to manage (i.e., accept, avoid, pursue, reduce, or
share/transfer) its risks or seize opportunities; and

▪ the implications of the organization’s planned responses on its income statement, cash flow
statement, and balance sheet.

a. Exposure to Climate-Related Risks and Opportunities

Exposure, in this context, refers to an organization’s vulnerability to negative impacts or capability of
realizing positive impacts from the transition to a low-carbon economy and/or the physical aspects of

15
Financial performance refers to an organization’s income and expenses as reflected on its income and cashflow statements (actual) or
potential income and expenses under different climate-related scenarios.
16
Financial position refers to an organization’s assets, liabilities, and equity as reflected on its balance sheet (actual) or potential assets,
liabilities, and equity under different climate-related scenarios.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 10

 climate change. When considering its exposure to climate-related risks and opportunities, an
organization should consider the exposure of its value chain as well.

The complexity and uncertainty associated with climate change make it difficult to identify the specific
touchpoints and time frames in which climate change may affect an organization. As a starting point,
an organization should assess its value chain over a reasonable time frame as it relates to the
following:17

▪ climate-related risks including (1) transition risks such as policy constraints on emissions,
imposition of carbon tax, water restrictions, land use restrictions or incentives, and market
demand and supply shifts and (2) physical risks such as the disruption of operations or
destruction of property and

▪ climate-related opportunities such as access to new markets and new technology (e.g., carbon
capture and storage technology).

Importantly, an organization should assess its climate-related risks and opportunities within the
A. context of its businesses, operations, and physical locations in order to determine potential financial
Introduction implications. In making such an assessment, an organization should consider (1) current and
anticipated policy constraints and incentives in relevant jurisdictions, technology changes and
B.
availability, and market changes and (2) whether an organization’s physical locations or suppliers are
Recommendations
particularly vulnerable to physical impacts from climate change. For example, an organization may
C. have high emissions, but if anticipated policy in the organization’s jurisdiction fails to constrain
Guidance for All Sectors emissions in a binding manner, the organization may determine financial impacts are minimal over its
planning horizon.
D.
Supplemental Guidance
for the Financial Sector b. Responses to Climate-Related Risks and Opportunities
After assessing its exposure to climate-related risks and opportunities, an organization needs to
E. choose how to respond to the identified risks and opportunities, including the following:
Supplemental Guidance
for Non-Financial Groups ▪ the risk management actions it plans to undertake (i.e., accept, avoid, pursue, reduce, or
share/transfer);
F.
Fundamental Principles ▪ capital expenditures (CapEx) on or financing towards new technology or facilities that may be
for Effective Disclosure
warranted; and
Appendices
▪ R&D expenditures that may be necessary.
These are largely strategic and financial planning decisions around the operating and capital
expenditures or financing the organization plans to undertake in response to climate-related risks and
opportunities. In some cases, these responses may be directly motivated by specific climate-related
issues, and in other cases, climate-related issues may be an additional, but not exclusive, motivational
factor around other business drivers. It is important for an organization to recognize that accepting
climate-related risks (i.e., “no response”) may also carry potential financial implications, such as a loss
in revenue, reduced asset valuations or write-offs, or increased costs.

c. Effectiveness of Reponses
Financial impacts associated with climate-related risks and opportunities depend on not only an
organization’s level of exposure and planned responses, but also on how effective its responses are in
realizing opportunities and mitigating or otherwise managing risks. An organization, therefore, should
monitor implementation of its responses against both internal targets and external factors to assess
their effectiveness. For example, an organization that has made investments in new products to take

17
An important aspect for organizations to consider is the time horizon for assessing exposures. While the common perception is that climate-
related risks are “long term,” arising in 10, 20, or 30 years, this may not be the case. Policies, technology innovation, and markets are likely to
adjust and shift in advance of many foreseeable climate trends. Likewise, more frequent and severe storms, floods, and droughts are
occurring today. Organizations, therefore, should carefully consider the time horizon they use to evaluate their exposures and possibly assess
them over a range of time horizons to capture potential exposures arising in the short, medium, and longer term.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 11

 advantage of climate-related opportunities may establish an internal target for revenues associated
with sales of the new products to gauge effectiveness.

d. Linking It All Together

Determining the financial impacts of climate-related risks and opportunities generally involves an
organization assessing (1) its exposures, (2) its planned responses, and (3) its response effectiveness.
Analyses should focus on the following:

▪ the exposure and potential financial impact if no action is undertaken and

▪ the financial implications of managing risks and maximizing opportunities in the context of an
organization’s overall business strategy and environment.

Forward-looking analyses are especially important, but challenging. Efforts to mitigate and adapt to
climate change are without historical precedent, and many aspects about the timing and magnitude of
climate change in specific contexts are uncertain. For these reasons, the Task Force believes scenario
analysis is an important tool for organizations to use in their strategic planning processes. Scenario
A. analysis and other strategic planning tools can help organizations consider a broader range of
Introduction assumptions, uncertainties, and potential future states when assessing financial implications of climate
change.
B.
Recommendations

C.
5. Summary of Additional Supporting Materials
Guidance for All Sectors Since the Task Force issued its final recommendations in June 2017, it has monitored climate-related
financial disclosure practices and sought to identify and address implementation challenges raised by
D.
Supplemental Guidance
preparers. In this regard, the Task Force has published guidance on specific topics intended to help
for the Financial Sector address identified challenges and better support implementation, as described below.

E. The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities (2017) provides
Supplemental Guidance
information on types of climate-related scenarios, the application of scenario analysis, and the key
for Non-Financial Groups
challenges in implementing scenario analysis to support an organization’s disclosure of the resilience
F. of its strategy, taking into consideration different climate-related scenarios.18
Fundamental Principles
for Effective Disclosure Guidance on Scenario Analysis for Non-Financial Companies (2020) provides practical, process-
oriented ways for organizations to use climate-related scenario analysis and ideas for disclosing the
Appendices
resilience of their strategies under different climate-related scenarios.19

Guidance on Risk Management Integration and Disclosure (2020) describes considerations for
organizations interested in integrating climate-related risks into their existing risk management
processes and disclosing information on their risk management processes in alignment with the Task
Force’s recommendations.20

Guidance on Metrics, Targets, and Transition Plans (2021) describes recent developments around
climate-related metrics and users’ increasing focus on information describing organizations’ plans for
transitioning to a low-carbon economy. The guidance also describes a set of cross-industry, climate-
related metric categories (described in Appendix 2: Cross-Industry, Climate-Related Metric Categories)
that the Task Force believes are applicable to all organizations.21

18
TCFD, The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities, June 29, 2017.
19
TCFD, Guidance on Scenario Analysis for Non-Financial Companies, October 29, 2020.
20
TCFD, Guidance on Risk Management Integration and Disclosure, October 29, 2020.
21
TCFD, Guidance on Metrics, Targets, and Transition Plans, October 14, 2021.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 12

 B.
Recommendations

A.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 13

 B. Recommendations
The Task Force’s recommendations are structured around four thematic areas that are core elements
of how organizations operate—governance, strategy, risk management, and metrics and targets
(Figure 5). The four overarching recommendations are supported by key climate-related financial
disclosures—referred to as recommended disclosures—that build out the framework with information
that will help investors and others understand how reporting organizations assess climate-related
issues (Figure 6, p. 15).

Figure 5
Core Elements of Recommended Climate-Related Financial Disclosures
Governance
The organization’s governance around climate-related risks
Governance and opportunities

Strategy
A. Strategy The actual and potential impacts of climate-related risks and
Introduction
opportunities on the organization’s businesses, strategy, and

B.
Risk financial planning

Recommendations Management Risk Management

The processes used by the organization to identify, assess,
C.
Metrics and manage climate-related risks
Guidance for All Sectors
and Targets Metrics and Targets
D. The metrics and targets used to assess and manage relevant
Supplemental Guidance
climate-related risks and opportunities
for the Financial Sector

E.
Supplemental Guidance The Task Force recommends that organizations provide climate-related financial disclosures in their
for Non-Financial Groups mainstream (i.e., public) annual financial filings and recognizes that most information included in
financial filings is subject to a materiality assessment. However, because climate-related risk is a non-
F.
Fundamental Principles
diversifiable risk that affects nearly all industries, many investors believe it requires special attention.
for Effective Disclosure For example, in assessing organizations’ financial and operating results, many investors want insight
into the governance and risk management context in which such results are achieved. The Task Force
Appendices
believes disclosures related to its Governance and Risk Management recommendations directly
address this need for context and should be included in financial filings.

For disclosures related to the Strategy and Metrics and Targets recommendations, the Task Force
believes organizations should provide such information in annual financial filings when the
information is deemed material. Certain organizations—those in the four non-financial groups that
have more than one billion U.S. dollar equivalent (USDE) in annual revenue—should consider
disclosing such information in other reports when the information is not deemed material and not
included in financial filings.22 Because these organizations are more likely than others to be financially
impacted over time, investors are interested in monitoring how these organizations’ strategies evolve.

Importantly, the recommendations were developed to apply broadly across sectors and jurisdictions
and should not be seen as superseding national disclosure requirements. Organizations should make
financial disclosures in accordance with their national disclosure requirements for financial filings.

22
The Task Force chose a one billion USDE annual revenue threshold because it captures organizations responsible for over 90% of Scope 1 and
2 GHG emissions in the industries represented by the four non-financial groups (about 2,250 organizations out of roughly 15,000).

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 14

 Figure 6

Recommendations and Supporting Recommended Disclosures

Governance Strategy Risk Management Metrics and Targets

Disclose the organization’s Disclose the actual and potential Disclose how the organization Disclose the metrics and targets
governance around climate- impacts of climate-related risks identifies, assesses, and manages used to assess and manage
related risks and opportunities. and opportunities on the climate-related risks. relevant climate-related risks and
organization’s businesses, opportunities where such
strategy, and financial planning information is material.
where such information is
material.

Recommended Disclosures Recommended Disclosures Recommended Disclosures Recommended Disclosures

a) Describe the board’s oversight a) Describe the climate-related a) Describe the organization’s a) Disclose the metrics used by
of climate-related risks and risks and opportunities the processes for identifying and the organization to assess
opportunities. organization has identified assessing climate-related risks. climate-related risks and
over the short, medium, and opportunities in line with its
long term. strategy and risk management
process.

b) Describe management’s role b) Describe the impact of b) Describe the organization’s b) Disclose Scope 1, Scope 2,
in assessing and managing climate-related risks and processes for managing and, if appropriate, Scope 3
climate-related risks and opportunities on the climate-related risks. greenhouse gas (GHG)
opportunities. organization’s businesses, emissions, and the related
strategy, and financial risks.
planning.

c) Describe the resilience of the c) Describe how processes for c) Describe the targets used by
organization’s strategy, taking identifying, assessing, and the organization to manage
into consideration different managing climate-related risks climate-related risks and
climate-related scenarios, are integrated into the opportunities and
including a 2°C or lower organization’s overall risk performance against targets.
scenario. management.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 15

 C.
Guidance for
All Sectors

A.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 16

 C. Guidance for All Sectors
The Task Force developed guidance to support all organizations in developing climate-related financial
disclosures consistent with its recommendations and recommended disclosures. The guidance assists
preparers by providing context and suggestions for implementing the recommended disclosures.

1. Governance
Investors, lenders, insurance underwriters, and other users of climate-related financial disclosures
(collectively referred to as “investors and other stakeholders”) are interested in understanding the role
an organization’s board plays in overseeing climate-related issues as well as management’s role in
assessing and managing those issues. Such information supports evaluations of whether material
climate-related issues receive appropriate board and management attention.

Governance
Disclose the organization’s governance around climate-related risks and opportunities.

Recommended Guidance for All Sectors

Disclosure a) In describing the board’s oversight of climate-related issues, organizations should
A. Describe the consider including a discussion of the following:
Introduction board’s oversight of
‒ processes and frequency by which the board and/or board committees (e.g., audit,
climate-related
B.
risk, or other committees) are informed about climate-related issues;
risks and
Recommendations opportunities. ‒ whether the board and/or board committees consider climate-related issues when
reviewing and guiding strategy, major plans of action, risk management policies,
C. annual budgets, and business plans as well as setting the organization’s
Guidance for All Sectors performance objectives, monitoring implementation and performance, and
overseeing major capital expenditures, acquisitions, and divestitures; and
D.
Supplemental Guidance
‒ how the board monitors and oversees progress against goals and targets for
for the Financial Sector addressing climate-related issues.

Recommended Guidance for All Sectors

E.
Disclosure b) In describing management’s role related to the assessment and management of climate-
Supplemental Guidance
for Non-Financial Groups Describe related issues, organizations should consider including the following information:
management’s role
‒ whether the organization has assigned climate-related responsibilities to
F. in assessing and
management-level positions or committees; and, if so, whether such management
Fundamental Principles managing climate-
positions or committees report to the board or a committee of the board and
for Effective Disclosure related risks and
whether those responsibilities include assessing and/or managing climate-related
opportunities.
issues;
Appendices
‒ a description of the associated organizational structure(s);
‒ processes by which management is informed about climate-related issues; and
‒ how management (through specific positions and/or management committees)
monitors climate-related issues.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 17

 2. Strategy23
Investors and other stakeholders need to understand how climate-related issues may affect an
organization’s businesses, strategy, and financial planning over the short, medium, and long term.
Such information is used to inform expectations about the future performance of an organization.

Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
Recommended Guidance for All Sectors
Disclosure a) Organizations should provide the following information:
Describe the
‒ a description of what they consider to be the relevant short-, medium-, and long-
climate-related
term time horizons, taking into consideration the useful life of the organization’s
risks and
assets or infrastructure and the fact that climate-related issues often manifest
opportunities the
themselves over the medium and longer terms;
organization has
identified over the ‒ a description of the specific climate-related issues potentially arising in each time
short, medium, and horizon (short, medium, and long term) that could have a material financial impact
long term. on the organization; and
A. ‒ a description of the process(es) used to determine which risks and opportunities
Introduction could have a material financial impact on the organization.
Organizations should consider providing a description of their risks and opportunities by
B.
sector and/or geography, as appropriate. In describing climate-related issues,
Recommendations
organizations should refer to Tables A1.1 and A1.2 (pp. 75–76).
C. Recommended Guidance for All Sectors
Guidance for All Sectors
Disclosure b) Building on recommended disclosure (a), organizations should discuss how identified
Describe the impact climate-related issues have affected their businesses, strategy, and financial planning.
D.
of climate-related
Supplemental Guidance Organizations should consider including the impact on their businesses, strategy, and
risks and
for the Financial Sector financial planning in the following areas:
opportunities on
the organization’s ‒ Products and services
E.
Supplemental Guidance
businesses, ‒ Supply chain and/or value chain
for Non-Financial Groups strategy, and
‒ Adaptation and mitigation activities
financial planning.
F. ‒ Investment in research and development
Fundamental Principles ‒ Operations (including types of operations and location of facilities)
for Effective Disclosure
‒ Acquisitions or divestments
Appendices ‒ Access to capital
Organizations should describe how climate-related issues serve as an input to their
financial planning process, the time period(s) used, and how these risks and
opportunities are prioritized. Organizations’ disclosures should reflect a holistic picture
of the interdependencies among the factors that affect their ability to create value over
time.
Organizations should describe the impact of climate-related issues on their financial
performance (e.g., revenues, costs) and financial position (e.g., assets, liabilities).24 If
climate-related scenarios were used to inform the organization’s strategy and financial
planning, such scenarios should be described.

23
The Task Force’s Guidance on Scenario Analysis for Non-Financial Companies, The Use of Scenario Analysis in Disclosure of Climate-Related Risks and
Opportunities, and Guidance on Metrics, Targets, and Transition Plans may be useful to organizations in disclosing information under this
recommendation.
24
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 18

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
Organizations that have made GHG emissions reduction commitments, operate in
jurisdictions that have made such commitments, or have agreed to meet investor
expectations regarding GHG emissions reductions should describe their plans for
transitioning to a low-carbon economy, which could include GHG emissions targets and
specific activities intended to reduce GHG emissions in their operations and value chain
or to otherwise support the transition.25

Recommended Guidance for All Sectors

Disclosure c) Organizations should describe how resilient their strategies are to climate-related risks
Describe the and opportunities, taking into consideration a transition to a low-carbon economy
resilience of the consistent with a 2°C or lower scenario and, where relevant to the organization,
organization’s scenarios consistent with increased physical climate-related risks.26
strategy, taking into
Organizations should consider discussing:
consideration
different climate- ‒ where they believe their strategies may be affected by climate-related risks and
related scenarios, opportunities;
including a 2°C or ‒ how their strategies might change to address such potential risks and
A. lower scenario. opportunities;
Introduction
‒ the potential impact of climate-related issues on financial performance
B. (e.g., revenues, costs) and financial position (e.g., assets, liabilities);27 and
Recommendations ‒ the climate-related scenarios and associated time horizon(s) considered.

C. Refer to Section D in the Task Force’s report for information on applying scenarios to
Guidance for All Sectors forward-looking analysis.

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

25
Organizations may agree to meet investor expectations regarding GHG emissions reductions for various reasons, including concerns about
access to or the cost of capital if they fail to do so.
26
In interpreting the phrase “2°C or lower,” organizations should consider aligning their scenario analysis with Article Two of the 2015 Paris
Agreement which commits parties to “holding the increasing in the global average temperature to well below 2°C above pre-industrial levels
and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”
27
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 19

 3. Risk Management28
Investors and other stakeholders need to understand how an organization’s climate-related risks are
identified, assessed, and managed and whether those processes are integrated in existing risk
management processes. Such information supports users of climate-related financial disclosures in
evaluating the organization’s overall risk profile and risk management activities.

Risk Management
Disclose how the organization identifies, assesses, and manages climate-related risks.

Recommended Guidance for All Sectors

Disclosure a) Organizations should describe their risk management processes for identifying and
Describe the assessing climate-related risks. An important aspect of this description is how
organization’s organizations determine the relative significance of climate-related risks in relation to
processes for other risks.
identifying and
Organizations should describe whether they consider existing and emerging regulatory
assessing climate-
requirements related to climate change (e.g., limits on emissions) as well as other
related risks.
relevant factors considered.
Organizations should also consider disclosing the following:
A. ‒ processes for assessing the potential size and scope of identified climate-related
Introduction risks and
‒ definitions of risk terminology used or references to existing risk classification
B.
frameworks used.
Recommendations

Recommended Guidance for All Sectors

C.
Disclosure b) Organizations should describe their processes for managing climate-related risks,
Guidance for All Sectors
Describe the including how they make decisions to mitigate, transfer, accept, or control those risks. In
organization’s addition, organizations should describe their processes for prioritizing climate-related
D.
processes for risks, including how materiality determinations are made within their organizations.
Supplemental Guidance
managing climate-
for the Financial Sector In describing their processes for managing climate-related risks, organizations should
related risks.
address the risks included in Tables A1.1 and A1.2 (pp. 75–76), as appropriate.
E.
Supplemental Guidance Recommended Guidance for All Sectors
for Non-Financial Groups Disclosure c) Organizations should describe how their processes for identifying, assessing, and
Describe how managing climate-related risks are integrated into their overall risk management.
F. processes for
Fundamental Principles identifying,
for Effective Disclosure assessing, and
managing climate-
Appendices related risks are
integrated into the
organization’s
overall risk
management.

28
The Task Force’s Guidance on Risk Management Integration and Disclosure may be useful to organizations in disclosing information under this
recommendation.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 20

 4. Metrics and Targets29
Investors and other stakeholders need to understand how an organization measures and monitors its
climate-related risks and opportunities. Access to the metrics and targets used by an organization
allows investors and other stakeholders to better assess the organization’s potential risk-adjusted
returns, ability to meet financial obligations, general exposure to climate-related issues, and progress
in managing or adapting to those issues.

Metrics and Targets

Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.

Recommended Guidance for All Sectors

Disclosure a) Organizations should provide the key metrics used to measure and manage climate-
Disclose the metrics related risks and opportunities, as described in Tables A1.1 and A1.2 (pp. 75–76), as well
used by the as metrics consistent with the cross-industry, climate-related metric categories described
organization to in Table A2.1 (p. 79).30 Organizations should consider including metrics on climate-related
assess climate- risks associated with water, energy, land use, and waste management where relevant
related risks and and applicable.
opportunities in
A.
Where climate-related issues are material, organizations should consider describing
line with its strategy
Introduction whether and how related performance metrics are incorporated into remuneration
and risk
policies.
management
B. Where relevant, organizations should provide their internal carbon prices as well as
process.
Recommendations climate-related opportunity metrics such as revenue from products and services
designed for a low-carbon economy.
C.
Guidance for All Sectors Metrics should be provided for historical periods to allow for trend analysis. Where
appropriate, organizations should consider providing forward-looking metrics for the
D. cross-industry, climate-related metric categories described in Table A2.1 (p. 79),
Supplemental Guidance consistent with their business or strategic planning time horizons. In addition, where not
for the Financial Sector apparent, organizations should provide a description of the methodologies used to
calculate or estimate climate-related metrics.
E.
Supplemental Guidance Recommended Guidance for All Sectors
for Non-Financial Groups Disclosure b) Organizations should provide their Scope 1 and Scope 2 GHG emissions independent of
Disclose Scope 1, a materiality assessment, and, if appropriate, Scope 3 GHG emissions and the related
F. Scope 2, and, if risks.31 All organizations should consider disclosing Scope 3 GHG emissions.32, 33
Fundamental Principles appropriate, Scope
GHG emissions should be calculated in line with the GHG Protocol methodology to allow
for Effective Disclosure 3 greenhouse gas
for aggregation and comparability across organizations and jurisdictions.34 As
(GHG) emissions,
appropriate, organizations should consider providing related, generally accepted
Appendices and the related
industry-specific GHG efficiency ratios.35
risks.

29
The Task Force’s Guidance on Metrics, Targets, and Transition Plans should be reviewed by organizations disclosing information under this
recommendation.
30
Financial organizations may find it more difficult to quantify exposure to climate-related risks because of challenges related to portfolio
aggregation and data availability. The Task Force suggests financial organizations provide qualitative and quantitative information, where data
and methodologies allow.
31
Emissions are a prime driver of rising global temperatures and, as such, are a key focal point of policy, regulatory, market, and technology
responses to limit climate change. As a result, organizations with significant emissions are likely to be impacted more significantly by
transition risk than other organizations. In addition, current or future constraints on emissions, either directly by emission restrictions or
indirectly through carbon budgets, may impact organizations financially.
32
The Task Force strongly encourages all organizations to disclose Scope 3 GHG emissions. While the Task Force recognizes the data and
methodological challenges associated with calculating Scope 3 GHG emissions, it believes such emissions are an important metric reflecting
an organization’s exposure to climate-related risks and opportunities. For guidance on reporting Scope 3 GHG emissions, see the GHG
Protocol’s The Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
33
When considering whether to disclose Scope 3 GHG emissions, organizations should consider whether such emissions are a significant
portion of their total GHG emissions. For example, see discussion of 40% threshold in the Science Based Targets initiative’s (SBTi’s) paper SBTi
Criteria and Recommendations, Version 4.2, April 2021, Section V, p. 10.
34
While challenges remain, the GHG Protocol methodology is the most widely recognized and used international standard for calculating GHG
emissions. Organizations may use national reporting methodologies if they are consistent with the GHG Protocol methodology.
35
For industries with high energy consumption, metrics related to emission intensity are important to provide. For example, emissions per unit
of economic output (e.g., unit of production, number of employees, or value-added) is widely used.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 21

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
GHG emissions and associated metrics should be provided for historical periods to allow
for trend analysis. In addition, where not apparent, organizations should provide a
description of the methodologies used to calculate or estimate the metrics.

Recommended Guidance for All Sectors

Disclosure c) Organizations should describe their key climate-related targets such as those related to
Describe the GHG emissions, water usage, energy usage, etc., in line with the cross-industry, climate-
targets used by the related metric categories in Table A2.1 (p. 79), where relevant, and in line with anticipated
organization to regulatory requirements or market constraints or other goals. Other goals may include
manage climate- efficiency or financial goals, financial loss tolerances, avoided GHG emissions through
related risks and the entire product life cycle, or net revenue goals for products and services designed for
opportunities and a low-carbon economy.
performance
In describing their targets, organizations should consider including the following:
against targets.
‒ whether the target is absolute or intensity based;
‒ time frames over which the target applies;

A. ‒ base year from which progress is measured; and

Introduction ‒ key performance indicators used to assess progress against targets.
Organizations disclosing medium-term or long-term targets should also disclose
B.
Recommendations
associated interim targets in aggregate or by business line, where available.
Where not apparent, organizations should provide a description of the methodologies
C. used to calculate targets and measures.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 22

 D.
Supplemental
Guidance for the
Financial Sector

A.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 23

 D. Supplemental Guidance for the Financial Sector
A key element of the FSB’s proposal for the Task Force was the development of climate-related
disclosures that “would enable stakeholders to understand better the concentrations of carbon-related
assets in the financial sector and the financial system’s exposures to climate-related risks.”36 The FSB’s
proposal also noted that disclosures by the financial sector would:

▪ “foster an early assessment of [climate-related] risks” and “facilitate market discipline” and
▪ “provide a source of data that can be analyzed at a systemic level, to facilitate authorities’
assessments of the materiality of any risks posed by climate change to the financial sector, and
the channels through which this is most likely to be transmitted.”

The Task Force organized the financial sector into four major industries, largely based on activities
performed, as follows: banks (lending), insurance companies (underwriting), asset managers (asset
management), and asset owners, which include public- and private-sector pension plans, endowments,
and foundations (investing). Given the important role of the financial sector as preparers of climate-
related financial disclosures described in the FSB’s proposal, the Task Force identified certain areas
where supplemental guidance was warranted, as shown in Figure 7. This supplemental guidance is
A. intended to provide additional context for the financial sector when preparing disclosures consistent
Introduction with the Task Force’s recommendations.

B.
Recommendations Figure 7
Supplemental Guidance for the Financial Sector
C.
Guidance for All Sectors Risk Metrics and
Governance Strategy
Management Targets
D.
Industries a) b) a) b) c) a) b) c) a) b) c)
Supplemental Guidance
for the Financial Sector
Banks
E.
Supplemental Guidance Insurance Companies
for Non-Financial Groups
Asset Owners
F.
Fundamental Principles
Asset Managers
for Effective Disclosure

Appendices

36
FSB, “Proposal for a Disclosure Task Force on Climate-Related Risks,” November 9, 2015.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 24

 1. Banks
Banks are exposed to climate-related risks and opportunities through their lending and other financial
intermediary activities as well as through their own operations. As financial intermediaries, banks may
assume exposure to material climate-related risks through their borrowers, customers, or
counterparties. Banks that provide loans or trade the securities of companies with direct exposure to
climate-related risks (e.g., fossil fuel producers, intensive fossil fuel consumers, real property owners,
or agricultural/food companies) may accumulate climate-related risks via their credit and equity
holdings. In particular, asset-specific credit or equity exposure to large fossil fuel producers or users
could present risks that merit disclosure or discussion in a bank's financial filings. In addition, as the
markets for lower-carbon and energy-efficient alternatives grow, banks may assume material
exposures in their lending and investment businesses. Banks could also become subject to litigation
related to their financing activities or via parties seeking damages or other legal recourse. Investors,
lenders, insurance underwriters, and other stakeholders need to be able to distinguish among banks’
exposures and risk profiles so that they can make informed financial decisions.

Governance
Disclose the organization’s governance around climate-related risks and opportunities.
A.
Introduction Recommended Guidance for All Sectors
Disclosure a) In describing the board’s oversight of climate-related issues, organizations should
B. Describe the consider including a discussion of the following:
Recommendations board’s oversight of
‒ processes and frequency by which the board and/or board committees (e.g., audit,
climate-related
risk, or other committees) are informed about climate-related issues;
C. risks and
Guidance for All Sectors opportunities. ‒ whether the board and/or board committees consider climate-related issues when
reviewing and guiding strategy, major plans of action, risk management policies,
D. annual budgets, and business plans as well as setting the organization’s
Supplemental Guidance performance objectives, monitoring implementation and performance, and
for the Financial Sector overseeing major capital expenditures, acquisitions, and divestitures; and

E.
‒ how the board monitors and oversees progress against goals and targets for
Supplemental Guidance addressing climate-related issues.
for Non-Financial Groups
Recommended Guidance for All Sectors
F. Disclosure b) In describing management’s role related to the assessment and management of climate-
Fundamental Principles Describe related issues, organizations should consider including the following information:
for Effective Disclosure management’s role
‒ whether the organization has assigned climate-related responsibilities to
in assessing and
management-level positions or committees; and, if so, whether such management
Appendices managing climate-
positions or committees report to the board or a committee of the board and
related risks and
whether those responsibilities include assessing and/or managing climate-related
opportunities.
issues;
‒ a description of the associated organizational structure(s);
‒ processes by which management is informed about climate-related issues; and
‒ how management (through specific positions and/or management committees)
monitors climate-related issues.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 25

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.

Recommended Guidance for All Sectors

Disclosure a) Organizations should provide the following information:
Describe the
‒ a description of what they consider to be the relevant short-, medium-, and long-
climate-related
term time horizons, taking into consideration the useful life of the organization’s
risks and
assets or infrastructure and the fact that climate-related issues often manifest
opportunities the
themselves over the medium and longer terms;
organization has
identified over the ‒ a description of the specific climate-related issues potentially arising in each time
short, medium, and horizon (short, medium, and long term) that could have a material financial impact
long term. on the organization and distinguish whether the climate-related risks are transition
or physical risks; and
‒ a description of the process(es) used to determine which risks and opportunities
could have a material financial impact on the organization.
Organizations should consider providing a description of their risks and opportunities by
sector and/or geography, as appropriate. In describing climate-related issues,
organizations should refer to Tables A1.1 and A1.2 (pp. 75–76).
A.
Introduction Supplemental Guidance for Banks
Banks should describe significant concentrations of credit exposure to carbon-related
B. assets.37 Additionally, banks should consider disclosing their climate-related risks
Recommendations (transition and physical) in their lending and other financial intermediary business
activities.
C.
Guidance for All Sectors Recommended Guidance for All Sectors
Disclosure b) Building on recommended disclosure (a), organizations should discuss how identified
D. Describe the impact climate-related issues have affected their businesses, strategy, and financial planning.
Supplemental Guidance of climate-related
for the Financial Sector Organizations should consider including the impact on their businesses, strategy, and
risks and
financial planning in the following areas:
opportunities on
E. Products and services
the organization’s ‒
Supplemental Guidance
businesses, ‒ Supply chain and/or value chain
for Non-Financial Groups
strategy, and
‒ Adaptation and mitigation activities
financial planning.
F.
‒ Investment in research and development
Fundamental Principles
for Effective Disclosure ‒ Operations (including types of operations and location of facilities)
‒ Acquisitions or divestments
Appendices
‒ Access to capital
Organizations should describe how climate-related issues serve as an input to their
financial planning process, the time period(s) used, and how these risks and
opportunities are prioritized. Organizations’ disclosures should reflect a holistic picture
of the interdependencies among the factors that affect their ability to create value over
time.
Organizations should describe the impact of climate-related issues on their financial
performance (e.g., revenues, costs) and financial position (e.g., assets, liabilities).38
If climate-related scenarios were used to inform the organization’s strategy and financial
planning, such scenarios should be described.

37
Recognizing that the term “carbon-related assets“ is not well defined, the Task Force encourages banks to use a consistent definition to
support comparability. For purposes of disclosing information on significant concentrations of credit exposure to carbon-related assets under
this framework, the Task Force suggests banks define carbon-related assets as those assets tied to the four non-financial groups identified by
the Task Force in its 2017 report (see Table 4, p. 56). There may be industries or sub-industries that are appropriate to exclude, such as water
utilities and independent power and renewable electricity producer industries. Banks should describe which industries they include.
38
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 26

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
Organizations that have made GHG emissions reduction commitments, operate in
jurisdictions that have made such commitments, or have agreed to meet investor
expectations regarding GHG emissions reductions should describe their plans for
transitioning to a low-carbon economy, which could include GHG emissions targets and
specific activities intended to reduce GHG emissions in their operations and value chain
or to otherwise support the transition.39

Recommended Guidance for All Sectors

Disclosure c) Organizations should describe how resilient their strategies are to climate-related risks
Describe the and opportunities, taking into consideration a transition to a low-carbon economy
resilience of the consistent with a 2°C or lower scenario and, where relevant to the organization,
organization’s scenarios consistent with increased physical climate-related risks.40
strategy, taking into
Organizations should consider discussing:
consideration
different climate- ‒ where they believe their strategies may be affected by climate-related risks and
related scenarios, opportunities;
including a 2°C or ‒ how their strategies might change to address such potential risks and
A. lower scenario. opportunities;
Introduction
‒ the potential impact of climate-related issues on financial performance
B. (e.g., revenues, costs) and financial position (e.g., assets, liabilities);41 and
Recommendations
‒ the climate-related scenarios and associated time horizon(s) considered.

C. Refer to Section D in the Task Force’s report for information on applying scenarios to
Guidance for All Sectors forward-looking analysis.

D.
Supplemental Guidance Risk Management
for the Financial Sector
Disclose how the organization identifies, assesses, and manages climate-related risks.
E. Recommended Guidance for All Sectors
Supplemental Guidance
Disclosure a) Organizations should describe their risk management processes for identifying and
for Non-Financial Groups
Describe the assessing climate-related risks. An important aspect of this description is how
organization’s organizations determine the relative significance of climate-related risks in relation to
F.
processes for other risks.
Fundamental Principles
for Effective Disclosure identifying and
Organizations should describe whether they consider existing and emerging regulatory
assessing climate-
requirements related to climate change (e.g., limits on emissions) as well as other
Appendices related risks.
relevant factors considered.
Organizations should also consider disclosing the following:
‒ processes for assessing the potential size and scope of identified climate-related
risks and
‒ definitions of risk terminology used or references to existing risk classification
frameworks used.

Supplemental Guidance for Banks

Banks should consider characterizing their climate-related risks in the context of
traditional banking industry risk categories such as credit risk, market risk, liquidity risk,
and operational risk.

39
Organizations may agree to meet investor expectations regarding GHG emissions reductions for various reasons, including concerns
about access to or the cost of capital if they fail to do so.
40
In interpreting the phrase “2°C or lower,” organizations should consider aligning their scenario analysis with Article Two of the 2015
Paris Agreement which commits parties to “holding the increasing in the global average temperature to well below 2°C above pre-industrial
levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”
41
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 27

 Risk Management
Disclose how the organization identifies, assesses, and manages climate-related risks.
Banks should also consider describing any risk classification frameworks used (e.g., the
Enhanced Disclosure Task Force’s framework for defining “Top and Emerging Risks”).42

Recommended Guidance for All Sectors

Disclosure b) Organizations should describe their processes for managing climate-related risks,
Describe the including how they make decisions to mitigate, transfer, accept, or control those risks.
organization’s In addition, organizations should describe their processes for prioritizing climate-related
processes for risks, including how materiality determinations are made within their organizations.
managing climate-
In describing their processes for managing climate-related risks, organizations should
related risks.
address the risks included in Tables A1.1 and A1.2 (pp. 75–76), as appropriate.

Recommended Guidance for All Sectors

Disclosure c) Organizations should describe how their processes for identifying, assessing, and
Describe how managing climate-related risks are integrated into their overall risk management.
processes for
identifying,
assessing, and
managing climate-
A. related risks are
Introduction integrated into the
organization’s
B. overall risk
Recommendations
management.

C.
Guidance for All Sectors
Metrics and Targets
D. Disclose the metrics and targets used to assess and manage relevant climate-related risks and
Supplemental Guidance
opportunities where such information is material.
for the Financial Sector
Recommended Guidance for All Sectors
E. Disclosure a) Organizations should provide the key metrics used to measure and manage climate-
Supplemental Guidance Disclose the metrics related risks and opportunities, as described in Tables A1.1 and A1.2 (pp. 75–76), as well
for Non-Financial Groups
used by the as metrics consistent with the cross-industry, climate-related metric categories
organization to described in Table A2.1 (p. 79).43
F.
assess climate-
Fundamental Principles Organizations should consider including metrics on climate-related risks associated with
related risks and
for Effective Disclosure water, energy, land use, and waste management where relevant and applicable.
opportunities in
line with its strategy Where climate-related issues are material, organizations should consider describing
Appendices
and risk whether and how related performance metrics are incorporated into remuneration
management policies.
process. Where relevant, organizations should provide their internal carbon prices as well as
climate-related opportunity metrics such as revenue from products and services
designed for a low-carbon economy.
Metrics should be provided for historical periods to allow for trend analysis. Where
appropriate, organizations should consider providing forward-looking metrics for the
cross-industry, climate-related metric categories described in Table A2.1 (p. 79),
consistent with their business or strategic planning time horizons. In addition, where not
apparent, organizations should provide a description of the methodologies used to
calculate or estimate climate-related metrics.

42
The Enhanced Disclosure Task Force was established by the FSB in to make recommendations on financial risk disclosures for banks. It
defined a top risk as “a current, emerged risk which has, across a risk category, business area or geographical area, the potential to have a
material impact on the financial results, reputation or sustainability or the business and which may crystallise within a short, perhaps one
year, time horizon.” An emerging risk was defined as “one which has large uncertain outcomes which may become certain in the longer term
(perhaps beyond one year) and which could have a material effect on the business strategy if it were to occur.”
43
Financial organizations may find it more difficult to quantify exposure to climate-related risks because of challenges related to portfolio
aggregation and data availability. The Task Force suggests financial organizations provide qualitative and quantitative information, where data
and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 28

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Supplemental Guidance for Banks
Banks should provide the metrics used to assess the impact of (transition and physical)
climate-related risks on their lending and other financial intermediary business activities
in the short, medium, and long term. Metrics provided may relate to credit exposure,
equity and debt holdings, or trading positions, broken down by:
‒ Industry44
‒ Geography
‒ Credit quality (e.g., investment grade or non-investment grade, internal rating
system)
‒ Average tenor
Banks should also provide the amount and percentage of carbon-related assets relative
to total assets as well as the amount of lending and other financing connected with
climate-related opportunities.45
Banks should describe the extent to which their lending and other financial intermediary
A. business activities, where relevant, are aligned with a well below 2°C scenario, using
Introduction whichever approach or metrics best suit their organizational context or capabilities.46
Banks should also indicate which financial intermediary business activities (e.g., loans to
B. specific sectors or industries) are included.
Recommendations
Recommended Guidance for All Sectors
C. Disclosure b) Organizations should provide their Scope 1 and Scope 2 GHG emissions independent of
Guidance for All Sectors Disclose Scope 1, a materiality assessment, and, if appropriate, Scope 3 GHG emissions and the related
Scope 2, and, if risks.47 All organizations should consider disclosing Scope 3 GHG emissions.48, 49
D. appropriate, Scope
GHG emissions should be calculated in line with the GHG Protocol methodology to allow
Supplemental Guidance 3 greenhouse gas
for aggregation and comparability across organizations and jurisdictions.50 As
for the Financial Sector (GHG) emissions,
appropriate, organizations should consider providing related, generally accepted
and the related
industry-specific GHG efficiency ratios.51
E. risks.
Supplemental Guidance GHG emissions and associated metrics should be provided for historical periods to allow
for Non-Financial Groups for trend analysis. In addition, where not apparent, organizations should provide a
description of the methodologies used to calculate or estimate the metrics.
F.
Supplemental Guidance for Banks
Fundamental Principles
for Effective Disclosure Banks should disclose GHG emissions for their lending and other financial intermediary
business activities where data and methodologies allow. These emissions should be
Appendices calculated in line with the Global GHG Accounting and Reporting Standard for the Financial
Industry developed by the Partnership for Carbon Accounting Financials (PCAF Standard)
or a comparable methodology (See Table 2, p. 50).52

44
Industry should be based on the Global Industry Classification Standard or national classification systems aligned with financial filing
requirements.
45
Recognizing that the term “carbon-related assets“ is not well defined, the Task Force encourages banks to use a consistent definition to
support comparability. For purposes of disclosing information on significant concentrations of credit exposure to carbon-related assets under
this framework, the Task Force suggests banks define carbon-related assets as those assets tied to four non-financial groups identified by the
Task Force in its 2017 report (see Table 4, p. 56). There may be industries or sub-industries that are appropriate to exclude, such as water
utilities and independent power and renewable electricity producer industries. Banks should describe which industries they include.
46
This could include forward-looking metrics, GHG emissions targets and progress against them, reducing emissions in their operations and
value chains, and working with customers to support their transition to a low-carbon economy. The Task Force acknowledges that there are
challenges to implementing portfolio alignment methodologies, including the resources involved, and encourages organizations to disclose
qualitative and quantitative information given existing data and methodologies. The Portfolio Alignment Team’s, Measuring Portfolio Alignment,
October 2021 outlines potential approaches and associated design decisions for portfolio alignment tools.
47
Emissions are a prime driver of rising global temperatures and, as such, are a key focal point of policy, regulatory, market, and technology
responses to limit climate change. As a result, organizations with significant emissions are likely to be impacted more significantly by
transition risk than other organizations. In addition, current or future constraints on emissions, either directly by emission restrictions or
indirectly through carbon budgets, may impact organizations financially.
48
The Task Force strongly encourages all organizations to disclose Scope 3 GHG emissions. While the Task Force recognizes the data and
methodological challenges associated with calculating Scope 3 GHG emissions, it believes such emissions are an important metric reflecting

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 29

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Recommended Guidance for All Sectors
Disclosure c) Organizations should describe their key climate-related targets such as those related to
Describe the GHG emissions, water usage, energy usage, etc., consistent with the cross-industry,
targets used by the climate-related metric categories in Table A2.1 (p. 79), where relevant, and in line with
organization to anticipated regulatory requirements or market constraints or other goals. Other goals
manage climate- may include efficiency or financial goals, financial loss tolerances, avoided GHG
related risks and emissions through the entire product life cycle, or net revenue goals for products and
opportunities and services designed for a low-carbon economy.
performance
In describing their targets, organizations should consider including the following:
against targets.
‒ whether the target is absolute or intensity based;
‒ time frames over which the target applies;
‒ base year from which progress is measured; and
‒ key performance indicators used to assess progress against targets.
Organizations disclosing medium-term or long-term targets should also disclose
A. associated interim targets in aggregate or by business line, where available.
Introduction
Where not apparent, organizations should provide a description of the methodologies
used to calculate targets and measures.
B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

an organization’s exposure to climate-related risks and opportunities. For guidance on reporting Scope 3 GHG emissions, see the GHG
Protocol’s The Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
49
When considering whether to disclose Scope 3 GHG emissions, organizations should consider whether such emissions are a significant
portion of their total GHG emissions. For example, see discussion of 40% threshold in the Science Based Targets initiative’s (SBTi’s) paper SBTi
Criteria and Recommendations, Version 4.2, April 2021, Section V, p. 10.
50
While challenges remain, the GHG Protocol methodology is the most widely recognized and used international standard for calculating GHG
emissions. Organizations may use national reporting methodologies if they are consistent with the GHG Protocol methodology.
51
For industries with high energy consumption, metrics related to emission intensity are important to provide. For example, emissions per unit
of economic output (e.g., unit of production, number of employees, or value-added) is widely used.
52
The Task Force recognizes the PCAF Standard currently does not provide explicit guidance on calculating GHG emissions for certain financial
products including private equity that refers to investment funds, green bonds, sovereign bonds, loans for securitization, exchange traded
funds, derivatives, and initial public offering (IPO) underwriting. The PCAF notes “guidance on such financial products will be considered and
published in later editions of the Standard” (PCAF Standard, p. 44). The Task Force encourages banks to disclose GHG emissions for additional
financial products, where data are available or can be reasonably estimated, as methodologies are published.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 30

 2. Insurance Companies53
For insurance companies, climate-related risks and opportunities constitute a key topic affecting the
industry’s core business (e.g., weather-related risk transfer business). The scientific consensus is that a
continued rise in average global temperatures will have a significant effect on weather-related natural
catastrophes and will account for an increasingly large share of natural catastrophe losses.54

Users of climate-related financial disclosures are specifically interested in how insurance companies
are evaluating and managing climate-related risks and opportunities in their underwriting and
investment activities. Such disclosure will support users in understanding how insurance companies
are incorporating climate-related risks into their strategy, risk management, underwriting processes,
and investment decisions. This guidance applies to the liability (underwriting) side of insurance
activities. For insurance companies’ investment activities, refer to the supplemental guidance for
asset owners.

A. Governance
Introduction
Disclose the organization’s governance around climate-related risks and opportunities.
B.
Recommended Guidance for All Sectors
Recommendations
Disclosure a) In describing the board’s oversight of climate-related issues, organizations should
Describe the consider including a discussion of the following:
C.
board’s oversight of
Guidance for All Sectors ‒ processes and frequency by which the board and/or board committees (e.g., audit,
climate-related
risk, or other committees) are informed about climate-related issues;
D. risks and
opportunities. ‒ whether the board and/or board committees consider climate-related issues when
Supplemental Guidance
for the Financial Sector
reviewing and guiding strategy, major plans of action, risk management policies,
annual budgets, and business plans as well as setting the organization’s
E. performance objectives, monitoring implementation and performance, and
Supplemental Guidance overseeing major capital expenditures, acquisitions, and divestitures; and
for Non-Financial Groups ‒ how the board monitors and oversees progress against goals and targets for
addressing climate-related issues.
F.
Fundamental Principles Recommended Guidance for All Sectors
for Effective Disclosure
Disclosure b) In describing management’s role related to the assessment and management of climate-
Describe related issues, organizations should consider including the following information:
Appendices
management’s role
‒ whether the organization has assigned climate-related responsibilities to
in assessing and
management-level positions or committees; and, if so, whether such management
managing climate-
positions or committees report to the board or a committee of the board and
related risks and
whether those responsibilities include assessing and/or managing climate-related
opportunities.
issues;
‒ a description of the associated organizational structure(s);
‒ processes by which management is informed about climate-related issues; and
‒ how management (through specific positions and/or management committees)
monitors climate-related issues.

53
Insurance companies include both insurers and re-insurers.
54
Intergovernmental Panel on Climate Change, Fifth Assessment Report (AR5), Cambridge University Press, 2014.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 31

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
Recommended Guidance for All Sectors
Disclosure a) Organizations should provide the following information:
Describe the
‒ a description of what they consider to be the relevant short-, medium-, and long-
climate-related
term horizons, taking into consideration the useful life of the organization’s assets
risks and
or infrastructure and the fact that climate-related issues often manifest
opportunities the
themselves over the medium and longer terms;
organization has
identified over the ‒ specific climate-related issues for each time horizon (short, medium, and long
short, medium, and term) that could have a material financial impact on the organization and
long term. distinguish whether the climate-related risks are transition or physical risks; and
‒ a description of the process(es) used to determine which risks and opportunities
could have a material financial impact on the organization.
Organizations should consider providing a description of their risks and opportunities by
A. sector and/or geography, as appropriate. In describing climate-related issues,
Introduction organizations should refer to Tables A1.1 and A1.2 (pp. 75–76).

B. Recommended Guidance for All Sectors

Recommendations Disclosure b) Building on recommended disclosure (a), organizations should discuss how identified
Describe the impact climate-related issues have affected their businesses, strategy, and financial planning.
C. of climate-related
Organizations should consider including the impact on their businesses, strategy, and
Guidance for All Sectors risks and
financial planning in the following areas:
opportunities on
D. the organization’s ‒ Products and services
Supplemental Guidance businesses, ‒ Supply chain and/or value chain
for the Financial Sector strategy, and
‒ Adaptation and mitigation activities
financial planning.
E. ‒ Investment in research and development
Supplemental Guidance
‒ Operations (including types of operations and location of facilities)
for Non-Financial Groups
‒ Acquisitions or divestments
F.
‒ Access to capital
Fundamental Principles
for Effective Disclosure Organizations should describe how climate-related issues serve as an input to their
financial planning process, the time period(s) used, and how these risks and
Appendices opportunities are prioritized. Organizations’ disclosures should reflect a holistic picture
of the interdependencies among the factors that affect their ability to create value over
time.
Organizations should describe the impact of climate-related issues on their financial
performance (e.g., revenues, costs) and financial position (e.g., assets, liabilities).55
If climate-related scenarios were used to inform the organization’s strategy and financial
planning, such scenarios should be described.
Organizations that have made GHG emissions reduction commitments, operate in
jurisdictions that have made such commitments, or have agreed to meet investor
expectations regarding GHG emissions reductions should describe their plans for
transitioning to a low-carbon economy, which could include GHG emissions targets and
specific activities intended to reduce GHG emissions in their operations and value chain
or to otherwise support the transition.56

Supplemental Guidance for Insurance Companies

Insurance companies should describe the potential impacts of climate-related risks and
opportunities as well as provide supporting quantitative information where available, on
their core businesses, products, and services, including:

55
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.
56
Organizations may agree to meet investor expectations regarding GHG emissions reductions for various reasons, including concerns about
access to or the cost of capital if they fail to do so.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 32

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
‒ information at the business division, sector, or geography levels;
‒ how the potential impacts influence client or broker selection; and
‒ whether specific climate-related products or competencies are under
development, such as insurance of green infrastructure, specialty climate-related
risk advisory services, and climate-related client engagement.

Recommended Guidance for All Sectors

Disclosure c) Organizations should describe how resilient their strategies are to climate-related risks
Describe the and opportunities, taking into consideration a transition to a low-carbon economy
resilience of the consistent with a 2°C or lower scenario and, where relevant to the organization,
organization’s scenarios consistent with increased physical climate-related risks.57
strategy, taking into
Organizations should consider discussing:
consideration
different climate- ‒ where they believe their strategies may be affected by climate-related risks and
A. opportunities;
related scenarios,
Introduction
including a 2°C or ‒ how their strategies might change to address such potential risks and
lower scenario. opportunities;
B.
Recommendations ‒ the potential impact of climate-related issues on financial performance
(e.g., revenues, costs) and financial position (e.g., assets, liabilities);58 and
C.
Guidance for All Sectors
‒ the climate-related scenarios and associated time horizon(s) considered.
Refer to Section D in the Task Force’s report for information on applying scenarios to
D. forward-looking analysis.
Supplemental Guidance
for the Financial Sector Supplemental Guidance for Insurance Companies
Insurance companies that perform climate-related scenario analysis on their
E. underwriting activities should provide the following information:
Supplemental Guidance
‒ description of the climate-related scenarios used, including the critical input
for Non-Financial Groups
parameters, assumptions and considerations, and analytical choices. In addition to
a 2°C scenario, insurance companies with substantial exposure to weather-related
F.
perils should consider using a greater than 2°C scenario to account for physical
Fundamental Principles
for Effective Disclosure effects of climate change and
‒ time frames used for the climate-related scenarios, including short-, medium-, and
Appendices long-term milestones.

Risk Management
Disclose how the organization identifies, assesses, and manages climate-related risks.

Recommended Guidance for All Sectors

Disclosure a) Organizations should describe their risk management processes for identifying and
Describe the assessing climate-related risks. An important aspect of this description is how
organization’s organizations determine the relative significance of climate-related risks in relation to
processes for other risks.
identifying and
Organizations should describe whether they consider existing and emerging regulatory
assessing climate-
requirements related to climate change (e.g., limits on emissions) as well as other
related risks.
relevant factors considered.

57
In interpreting the phrase “2°C or lower,” organizations should consider aligning their scenario analysis with Article Two of the 2015 Paris
Agreement which commits parties to “holding the increasing in the global average temperature to well below 2°C above pre-industrial levels
and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”
58
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 33

 Risk Management
Disclose how the organization identifies, assesses, and manages climate-related risks.
Organizations should also consider disclosing the following:
‒ processes for assessing the potential size and scope of identified climate-related
risks and
‒ definitions of risk terminology used or references to existing risk classification
frameworks used.

Supplemental Guidance for Insurance Companies

Insurance companies should describe the processes for identifying and assessing
climate-related risks on re-/insurance portfolios by geography, business division, or
product segments, including the following risks:
‒ physical risks from changing frequencies and intensities of weather-related perils;
‒ transition risks resulting from a reduction in insurable interest due to a decline in
value, changing energy costs, or implementation of carbon regulation; and
‒ liability risks that could intensify due to a possible increase in litigation.
A.
Introduction Recommended Guidance for All Sectors
Disclosure b) Organizations should describe their processes for managing climate-related risks,
B. Describe the including how they make decisions to mitigate, transfer, accept, or control those risks. In
Recommendations organization’s addition, organizations should describe their processes for prioritizing climate-related
processes for risks, including how materiality determinations are made within their organizations.
C. managing climate-
Guidance for All Sectors In describing their processes for managing climate-related risks, organizations should
related risks.
address the risks included in Tables A1.1 and A1.2 (pp. 75–76), as appropriate.
D. Supplemental Guidance for Insurance Companies
Supplemental Guidance Insurance companies should describe key tools or instruments, such as risk models,
for the Financial Sector
used to manage climate-related risks in relation to product development and pricing.

E. Insurance companies should also describe the range of climate-related events

Supplemental Guidance considered and how the risks generated by the rising propensity and severity of such
for Non-Financial Groups events are managed.

F. Recommended Guidance for All Sectors

Fundamental Principles Disclosure c) Organizations should describe how their processes for identifying, assessing, and
for Effective Disclosure Describe how managing climate-related risks are integrated into their overall risk management.
processes for
Appendices identifying,
assessing, and
managing climate-
related risks are
integrated into the
organization’s
overall risk
management.

Metrics and Targets

Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.

Recommended Guidance for All Sectors

Disclosure a) Organizations should provide the key metrics used to measure and manage climate-
Disclose the metrics related risks and opportunities, as described in Tables A1.1 and A1.2 (pp. 75–76), as well
used by the as metrics consistent with the cross-industry, climate-related metric categories
organization to described in Table A2.1 (p. 79).59 Organizations should consider including metrics on
assess climate- climate-related risks associated with water, energy, land use, and waste management

59
Financial organizations may find it more difficult to quantify exposure to climate-related risks because of challenges related to portfolio
aggregation and data availability. The Task Force suggests financial organizations provide qualitative and quantitative information, where data
and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 34

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
related risks and where relevant and applicable.
opportunities in
Where climate-related issues are material, organizations should consider describing
line with its strategy
whether and how related performance metrics are incorporated into remuneration
and risk
policies.
management
process. Where relevant, organizations should provide their internal carbon prices as well as
climate-related opportunity metrics such as revenue from products and services
designed for a low-carbon economy.
Metrics should be provided for historical periods to allow for trend analysis. Where
appropriate, organizations should consider providing forward-looking metrics for the
cross-industry, climate-related metric categories described in Table A2.1 (p. 79),
consistent with their business or strategic planning time horizons. In addition, where not
apparent, organizations should provide a description of the methodologies used to
calculate or estimate climate-related metrics.
A.
Introduction Supplemental Guidance for Insurance Companies
Insurance companies should provide aggregated risk exposure to weather-related
B. catastrophes of their property business (i.e., annual aggregated expected losses from
Recommendations weather-related catastrophes) by relevant jurisdiction.
Insurance companies should describe the extent to which their insurance underwriting
C.
activities, where relevant, are aligned with a well below 2°C scenario, using whichever
Guidance for All Sectors
approach or metrics best suit their organizational context or capabilities. 60 Insurance
companies should also indicate which insurance underwriting activities (e.g., lines of
D.
business) are included.
Supplemental Guidance
for the Financial Sector
Recommended Guidance for All Sectors
Disclosure b) Organizations should provide their Scope 1 and Scope 2 GHG emissions independent of
E.
Disclose Scope 1, a materiality assessment, and, if appropriate, Scope 3 GHG emissions and the related
Supplemental Guidance
for Non-Financial Groups
Scope 2, and, if risks.61 All organizations should consider disclosing Scope 3 GHG emissions.62, 63
appropriate, Scope
GHG emissions should be calculated in line with the GHG Protocol methodology to allow
F. 3 greenhouse gas
for aggregation and comparability across organizations and jurisdictions.64 As
Fundamental Principles (GHG) emissions,
appropriate, organizations should consider providing related, generally accepted
for Effective Disclosure and the related
industry-specific GHG efficiency ratios.65
risks.
Appendices GHG emissions and associated metrics should be provided for historical periods to allow
for trend analysis. In addition, where not apparent, organizations should provide a
description of the methodologies used to calculate or estimate the metrics.

60
This could include forward-looking metrics, GHG emissions targets and progress against them, reducing emissions in their operations and
value chains, or working with clients and brokers to support their transition to a low-carbon economy. The Task Force acknowledges that
there are challenges to implementing portfolio alignment methodologies, including the resources involved, and encourages organizations to
disclose qualitative and quantitative information given existing data and methodologies. The Portfolio Alignment Team’s, Measuring Portfolio
Alignment, October 2021 outlines potential approaches and associated design decisions for portfolio alignment tools.
61
Emissions are a prime driver of rising global temperatures and, as such, are a key focal point of policy, regulatory, market, and technology
responses to limit climate change. As a result, organizations with significant emissions are likely to be impacted more significantly by
transition risk than other organizations. In addition, current or future constraints on emissions, either directly by emission restrictions or
indirectly through carbon budgets, may impact organizations financially.
62
The Task Force strongly encourages all organizations to disclose Scope 3 GHG emissions. While the Task Force recognizes the data and
methodological challenges associated with calculating Scope 3 GHG emissions, it believes such emissions are an important metric reflecting
an organization’s exposure to climate-related risks and opportunities. For guidance on reporting Scope 3 GHG emissions, see the GHG
Protocol’s The Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
63
When considering whether to disclose Scope 3 GHG emissions, organizations should consider whether such emissions are a significant
portion of their total GHG emissions. For example, see discussion of 40% threshold in the Science Based Targets initiative’s (SBTi’s) paper SBTi
Criteria and Recommendations, Version 4.2, April 2021, Section V, p. 10.
64
While challenges remain, the GHG Protocol methodology is the most widely recognized and used international standard for calculating GHG
emissions. Organizations may use national reporting methodologies if they are consistent with the GHG Protocol methodology.
65
For industries with high energy consumption, metrics related to emission intensity are important to provide. For example, emissions per unit
of economic output (e.g., unit of production, number of employees, or value-added) is widely used.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 35

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Supplemental Guidance for Insurance Companies
Insurance companies should disclose weighted average carbon intensity or GHG
emissions associated with commercial property and specialty lines of business where
data and methodologies allow.66
Recommended Guidance for All Sectors
Disclosure c) Organizations should describe their key climate-related targets such as those related to
Describe the GHG emissions, water usage, energy usage, etc., consistent with the cross-industry,
targets used by the climate-related metric categories in Table A2.1 (p. 79), where relevant, and in line with
organization to anticipated regulatory requirements or market constraints or other goals. Other goals
manage climate- may include efficiency or financial goals, financial loss tolerances, avoided GHG
related risks and emissions through the entire product life cycle, or net revenue goals for products and
opportunities and services designed for a low-carbon economy.
performance
In describing their targets, organizations should consider including the following:
A. against targets.
‒ whether the target is absolute or intensity based;
Introduction
‒ time frames over which the target applies;
B.
‒ base year from which progress is measured; and
Recommendations
‒ key performance indicators used to assess progress against targets.
C. Organizations disclosing medium-term or long-term targets should also disclose
Guidance for All Sectors associated interim targets in aggregate or by business line, where available.

D. Where not apparent, organizations should provide a description of the methodologies

Supplemental Guidance used to calculate targets and measures.
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

66
The CRO Forum’s 2020 Carbon Footprinting Methodology for Underwriting Portfolios provides a methodology for adapting WACI for insurance
underwriting activities (See Table 3 (p. 52) for a description of the methodology). The Partnership for Carbon Accounting Financials (PCAF) is
working in collaboration with members of the Net-Zero Insurance Alliance as well as other insurance companies to develop a methodology for
measuring GHG emissions associated with underwriting activities. Insurance companies should follow these or other comparable industry
guidance as they become available.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 36

 3. Asset Owners
Asset owners are a diverse group that include public- and private-sector pension plans, re-/insurance
companies, endowments, and foundations and invest assets on their own behalf or on behalf of their
beneficiaries. Asset owners invest according to a mandate or investment strategy set out by their
oversight body or their beneficiaries. Asset owners have various investment horizons that influence
their risk tolerance and investment strategies. Many asset owners have broadly diversified investment
portfolios across investment strategies, asset classes, and regions and portfolios with thousands of
underlying individual company and government exposures. Asset owners may hire asset managers to
invest on their behalf.67

Whether asset owners invest directly or through asset managers, asset owners bear the potential
transition and physical risks to which their investments are exposed. Similarly, asset owners can
benefit from the potential returns on the investment opportunities associated with climate change.

Asset owners sit at the top of the investment chain and, therefore, have an important role to play in
influencing the organizations in which they invest to provide better climate-related financial disclosures.
A. Disclosure of climate-related risks and opportunities by asset owners—to the extent possible given
Introduction
existing data and methodology constraints—allows beneficiaries and other audiences to assess the
B. asset owner’s investment considerations and approach to climate change. This may include an
Recommendations assessment of the asset owner’s integration of appropriate climate-related financial information into its
investment activities in various ways, for example, in setting investment strategy, making new
C.
investment decisions, and managing its existing portfolio. By encouraging climate-related financial
Guidance for All Sectors
disclosures by asset owners, beneficiaries and other stakeholders will be in a position to better
D. understand exposures to climate-related risks and opportunities. Further, climate-related financial
Supplemental Guidance disclosures by asset owners may encourage better disclosures across the investment chain—from asset
for the Financial Sector
owners to asset managers to underlying companies—thus enabling all organizations and individuals to
E.
make better-informed investment decisions.
Supplemental Guidance
for Non-Financial Groups Asset owners have contributed to the success of the TCFD in many ways, including by voluntarily
publishing their own “TCFD reports.” In these reports, asset owners have highlighted GHG emissions
F.
data from their respective portfolios and how their governance structures have developed to manage
Fundamental Principles
for Effective Disclosure climate-related risk. Governance structures have developed to collect and analyze GHG emissions data
as a proxy for climate-related risk from investee companies, either directly or via third party asset
Appendices managers and data analytics specialists. The Task Force recognizes asset owners often issue reports,
including ones containing climate-related information, directly to their beneficiaries or members rather
than making them available publicly as would generally be the case with public companies. As a
result, some of the cross-industry, climate-related metrics described in Appendix 2 may be less
relevant for asset owners than for other organizations, particularly where flexibility is needed on the
specific metrics and methodologies used.68 Nevertheless, the Task Force believes the cross-industry,
climate-related metrics have some applicability to asset owners because, by asking for this
standardized information, asset owners encourage all organizations to publish TCFD-aligned
information.

67
In this role, asset managers also act as fiduciaries. Asset managers invest within the guidelines specified by the asset owner for a given
mandate set out in the investment management agreement or the product specification.
68
The Task Force also understands asset owners may need several years to implement relevant cross-industry, climate-related metrics,
particularly where assets are held through third party mandates such as pooled funds. The data and methodologies for some of these
metrics, such as the impact of climate change on investment income or asset valuations, are very much in the early stages of development;
and it may take time before methodologies have been developed and can be applied in practice. The Task Force also recognizes the
methodological challenges of calculating GHG emissions associated with certain asset classes (e.g., sovereign bonds) and accepts research is
ongoing. In determining whether a particular category of metric is relevant, asset owners should consider whether the information is used as
part of the management of climate-related risks or investment decision-making processes.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 37

 Governance
Disclose the organization’s governance around climate-related risks and opportunities.

Recommended Guidance for All Sectors

Disclosure a) In describing the board’s oversight of climate-related issues, organizations should
Describe the consider including a discussion of the following:
board’s oversight of
‒ processes and frequency by which the board and/or board committees (e.g., audit,
climate-related
risk, or other committees) are informed about climate-related issues;
risks and
opportunities. ‒ whether the board and/or board committees consider climate-related issues when
reviewing and guiding strategy, major plans of action, risk management policies,
annual budgets, and business plans as well as setting the organization’s
performance objectives, monitoring implementation and performance, and
overseeing major capital expenditures, acquisitions, and divestitures; and
‒ how the board monitors and oversees progress against goals and targets for
addressing climate-related issues.

Recommended Guidance for All Sectors

A. Disclosure b) In describing management’s role related to the assessment and management of climate-
Introduction Describe related issues, organizations should consider including the following information:
management’s role
‒ whether the organization has assigned climate-related responsibilities to
B. in assessing and
Recommendations
management-level positions or committees; and, if so, whether such management
managing climate-
positions or committees report to the board or a committee of the board and
related risks and
C. whether those responsibilities include assessing and/or managing climate-related
opportunities.
Guidance for All Sectors issues;
‒ a description of the associated organizational structure(s);
D.
Supplemental Guidance
‒ processes by which management is informed about climate-related issues; and
for the Financial Sector ‒ how management (through specific positions and/or management committees)
monitors climate-related issues.
E.
Supplemental Guidance
for Non-Financial Groups Strategy
F. Disclose the actual and potential impacts of climate-related risks and opportunities on the
Fundamental Principles organization’s businesses, strategy, and financial planning where such information is material.
for Effective Disclosure
Recommended Guidance for All Sectors
Appendices Disclosure a) Organizations should provide the following information:
Describe the
‒ a description of what they consider to be the relevant short-, medium-, and long-
climate-related
term horizons, taking into consideration the useful life of the organization’s assets
risks and
or infrastructure and the fact that climate-related issues often manifest
opportunities the
themselves over the medium and longer terms;
organization has
identified over the ‒ specific climate-related issues for each time horizon (short, medium, and long
short, medium, and term) that could have a material financial impact on the organization and
long term. distinguish whether the climate-related risks are transition or physical risks; and
‒ a description of the process(es) used to determine which risks and opportunities
could have a material financial impact on the organization.
Organizations should consider providing a description of their risks and opportunities by
sector and/or geography, as appropriate. In describing climate-related issues,
organizations should refer to Tables A1.1 and A1.2 (pp. 75–76).

Recommended Guidance for All Sectors

Disclosure b) Building on recommended disclosure (a), organizations should discuss how identified
Describe the impact climate-related issues have affected their businesses, strategy, and financial planning.
of climate-related
Organizations should consider including the impact on their businesses, strategy, and
risks and
financial planning in the following areas:
opportunities on
the organization’s ‒ Products and services
businesses, ‒ Supply chain and/or value chain
‒ Adaptation and mitigation activities

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 38

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
strategy, and ‒ Investment in research and development
financial planning.
‒ Operations (including types of operations and location of facilities)
‒ Acquisitions or divestments
‒ Access to capital
Organizations should describe how climate-related issues serve as an input to their
financial planning process, the time period(s) used, and how these risks and
opportunities are prioritized. Organizations’ disclosures should reflect a holistic picture
of the interdependencies among the factors that affect their ability to create value over
time.
Organizations should describe the impact of climate-related issues on their financial
performance (e.g., revenues, costs) and financial position (e.g., assets, liabilities).69
If climate-related scenarios were used to inform the organization’s strategy and financial
A.
planning, such scenarios should be described.
Introduction
Organizations that have made GHG emissions reduction commitments, operate in
B. jurisdictions that have made such commitments, or have agreed to meet investor
Recommendations expectations regarding GHG emissions reductions should describe their plans for
transitioning to a low-carbon economy, which could include GHG emissions targets and
C. specific activities intended to reduce GHG emissions in their operations and value chain
Guidance for All Sectors or to otherwise support the transition.70

Supplemental Guidance for Asset Owners

D.
Supplemental Guidance
Asset owners should describe how climate-related risks and opportunities are factored
for the Financial Sector into relevant investment strategies. This could be described from the perspective of the
total fund or investment strategy or individual investment strategies for various asset
E. classes.
Supplemental Guidance
for Non-Financial Groups Recommended Guidance for All Sectors
Disclosure c) Organizations should describe how resilient their strategies are to climate-related risks
F. Describe the and opportunities, taking into consideration a transition to a low-carbon economy
Fundamental Principles resilience of the consistent with a 2°C or lower scenario and, where relevant to the organization,
for Effective Disclosure organization’s scenarios consistent with increased physical climate-related risks.71
strategy, taking into
Organizations should consider discussing:
Appendices consideration
different climate- ‒ where they believe their strategies may be affected by climate-related risks and
related scenarios, opportunities;
including a 2°C or ‒ how their strategies might change to address such potential risks and
lower scenario. opportunities;
‒ the potential impact of climate-related issues on financial performance
(e.g., revenues, costs) and financial position (e.g., assets, liabilities);72 and
‒ the climate-related scenarios and associated time horizon(s) considered.
Refer to Section D in the Task Force’s report for information on applying scenarios to
forward-looking analysis.

Supplemental Guidance for Asset Owners

Asset owners that perform scenario analysis should consider providing a discussion of
how climate-related scenarios are used, such as to inform investments in specific assets.

69
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.
70
Organizations may agree to meet investor expectations regarding GHG emissions reductions for various reasons, including concerns about
access to or the cost of capital if they fail to do so.
71
In interpreting the phrase “2°C or lower,” organizations should consider aligning their scenario analysis with Article Two of the 2015 Paris
Agreement which commits parties to “holding the increasing in the global average temperature to well below 2°C above pre-industrial levels
and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”
72
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 39

 Risk Management
Disclose how the organization identifies, assesses, and manages climate-related risks.

Recommended Guidance for All Sectors

Disclosure a) Organizations should describe their risk management processes for identifying and
Describe the assessing climate-related risks. An important aspect of this description is how
organization’s organizations determine the relative significance of climate-related risks in relation to
processes for other risks.
identifying and
Organizations should describe whether they consider existing and emerging regulatory
assessing climate-
requirements related to climate change (e.g., limits on emissions) as well as other
related risks.
relevant factors considered.
Organizations should also consider disclosing the following:
‒ processes for assessing the potential size and scope of identified climate-related
risks and
‒ definitions of risk terminology used or references to existing risk classification
frameworks used.
A.
Introduction Supplemental Guidance for Asset Owners
Asset owners should describe, where appropriate, engagement activity with investee
B. companies to encourage better disclosure and practices related to climate-related risks
Recommendations to improve data availability and asset owners’ ability to assess climate-related risks.

C. Recommended Guidance for All Sectors

Guidance for All Sectors Disclosure b) Organizations should describe their processes for managing climate-related risks,
Describe the including how they make decisions to mitigate, transfer, accept, or control those risks. In
D. organization’s addition, organizations should describe their processes for prioritizing climate-related
Supplemental Guidance processes for risks, including how materiality determinations are made within their organizations.
for the Financial Sector managing climate-
In describing their processes for managing climate-related risks, organizations should
related risks.
E.
address the risks included in Tables A.1 and A.2 (pp. 75–76), as appropriate.
Supplemental Guidance Supplemental Guidance for Asset Owners
for Non-Financial Groups
Asset owners should describe how they consider the positioning of their total portfolio
with respect to the transition to a low-carbon energy supply, production, and use. This
F.
could include explaining how asset owners actively manage their portfolios’ positioning
Fundamental Principles
for Effective Disclosure
in relation to this transition.

Recommended Guidance for All Sectors

Appendices
Disclosure c) Organizations should describe how their processes for identifying, assessing, and
Describe how managing climate-related risks are integrated into their overall risk management.
processes for
identifying,
assessing, and
managing climate-
related risks are
integrated into the
organization’s
overall risk
management.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 40

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.

Recommended Guidance for All Sectors

Disclosure a) Organizations should provide the key metrics used to measure and manage climate-
Disclose the metrics related risks and opportunities, as described in Tables A1.1 and A1.2 (pp. 75–76), as well
used by the as metrics consistent with the cross-industry, climate-related metric categories
organization to described in Table A2.1 (p. 79).73 Organizations should consider including metrics on
assess climate- climate-related risks associated with water, energy, land use, and waste management
related risks and where relevant and applicable.
opportunities in
Where climate-related issues are material, organizations should consider describing
line with its strategy
whether and how related performance metrics are incorporated into remuneration
and risk
policies.
management
process. Where relevant, organizations should provide their internal carbon prices as well as
climate-related opportunity metrics such as revenue from products and services
A. designed for a low-carbon economy.
Introduction Metrics should be provided for historical periods to allow for trend analysis. Where
appropriate, organizations should consider providing forward-looking metrics for the
B.
cross-industry, climate-related metric categories described in Table A2.1 (p. 79),
Recommendations
consistent with their business or strategic planning time horizons. In addition, where not
apparent, organizations should provide a description of the methodologies used to
C.
calculate or estimate climate-related metrics.
Guidance for All Sectors
Supplemental Guidance for Asset Owners
D. Asset owners should describe metrics used to assess climate-related risks and
Supplemental Guidance opportunities in each fund or investment strategy. Where relevant, asset owners should
for the Financial Sector also describe how these metrics have changed over time.

E. Where appropriate, asset owners should provide metrics considered in investment

Supplemental Guidance decisions and monitoring.
for Non-Financial Groups Asset owners should describe the extent to which assets they own and their funds and
investment strategies, where relevant, are aligned with a well below 2°C scenario, using
F.
whichever approach or metrics best suit their organizational context or capabilities. 74, 75
Fundamental Principles
Asset owners should also indicate which asset classes are included.
for Effective Disclosure

Appendices

73
Financial organizations may find it more difficult to quantify exposure to climate-related risks because of challenges related to portfolio
aggregation and data availability. The Task Force suggests financial organizations provide qualitative and quantitative information, where data
and methodologies allow.
74
This could include forward-looking metrics, GHG emissions targets and progress against them, reducing emissions in their operations and
value chains, oversight of asset managers, and engagement with investee companies on their transition to a low-carbon economy. The Task
Force acknowledges that there are challenges to implementing portfolio alignment methodologies, including the resources involved, and
encourages organizations to disclose qualitative and quantitative information given existing data and methodologies. The Portfolio Alignment
Team’s, Measuring Portfolio Alignment, October 2021 outlines potential approaches and associated design decisions for portfolio alignment
tools.
75
While the Task Force’s supplemental guidance for asset owners addresses considerations when reporting to beneficiaries, the Task Force
believes an asset owners’ disclosure of the extent to which their assets are aligned with a well below 2°C scenario may also be of interest to a
wider range of stakeholders. As such, the Task Force encourages asset owners to disclose this information publicly, where appropriate.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 41

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Recommended Guidance for All Sectors
Disclosure b) Organizations should provide their Scope 1 and Scope 2 GHG emissions independent of
Disclose Scope 1, a materiality assessment, and, if appropriate, Scope 3 GHG emissions and the related
Scope 2, and, if risks.76 All organizations should consider disclosing Scope 3 GHG emissions.77, 78
appropriate, Scope
GHG emissions should be calculated in line with the GHG Protocol methodology to allow
3 greenhouse gas
for aggregation and comparability across organizations and jurisdictions.79 As
(GHG) emissions,
appropriate, organizations should consider providing related, generally accepted
and the related
industry-specific GHG efficiency ratios.80
risks.
GHG emissions and associated metrics should be provided for historical periods to allow
for trend analysis. In addition, where not apparent, organizations should provide a
description of the methodologies used to calculate or estimate the metrics.

Supplemental Guidance for Asset Owners

A. Asset owners should disclose GHG emissions for assets they own and the weighted
Introduction average carbon intensity (WACI) for each fund or investment strategy, where data and
methodologies allow. These emissions should be calculated in line with the Global GHG
B. Accounting and Reporting Standard for the Financial Industry developed by the
Recommendations Partnership for Carbon Accounting Financials (PCAF Standard) or a comparable
methodology (See Table 2, p. 50).81
C. In addition to WACI, asset owners should consider providing other carbon footprinting
Guidance for All Sectors
metrics they believe are useful for decision-making. See Table 3 (p. 52) for additional
common carbon footprinting and exposure metrics.82
D.
Supplemental Guidance Recommended Guidance for All Sectors
for the Financial Sector Disclosure c) Organizations should describe their key climate-related targets such as those related to
Describe the GHG emissions, water usage, energy usage, etc., consistent with the cross-industry,
E.
targets used by the climate-related metric categories in Table A2.1 (p. 79), where relevant, and in line with
Supplemental Guidance
organization to anticipated regulatory requirements or market constraints or other goals. Other goals
for Non-Financial Groups
manage climate- may include efficiency or financial goals, financial loss tolerances, avoided GHG
F.
related risks and emissions through the entire product life cycle, or net revenue goals for products and
Fundamental Principles opportunities and services designed for a low-carbon economy.
for Effective Disclosure performance
against targets.
Appendices

76
Emissions are a prime driver of rising global temperatures and, as such, are a key focal point of policy, regulatory, market, and technology
responses to limit climate change. As a result, organizations with significant emissions are likely to be impacted more significantly by
transition risk than other organizations. In addition, current or future constraints on emissions, either directly by emission restrictions or
indirectly through carbon budgets, may impact organizations financially.
77
The Task Force strongly encourages all organizations to disclose Scope 3 GHG emissions. While the Task Force recognizes the data and
methodological challenges associated with calculating Scope 3 GHG emissions, it believes such emissions are an important metric reflecting
an organization’s exposure to climate-related risks and opportunities. For guidance on reporting Scope 3 GHG emissions, see the GHG
Protocol’s The Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
78
When considering whether to disclose Scope 3 GHG emissions, organizations should consider whether such emissions are a significant
portion of their total GHG emissions. For example, see discussion of 40% threshold in the Science Based Targets initiative’s (SBTi’s) paper SBTi
Criteria and Recommendations, Version 4.2, April 2021, Section V, p. 10.
79
While challenges remain, the GHG Protocol methodology is the most widely recognized and used international standard for calculating GHG
emissions. Organizations may use national reporting methodologies if they are consistent with the GHG Protocol methodology.
80
For industries with high energy consumption, metrics related to emission intensity are important to provide. For example, emissions per unit
of economic output (e.g., unit of production, number of employees, or value-added) is widely used.
81
The Task Force recognizes the PCAF Standard currently does not provide explicit guidance on calculating GHG emissions for certain financial
products including private equity that refers to investment funds, green bonds, sovereign bonds, loans for securitization, exchange traded
funds, derivatives, and initial public offering (IPO) underwriting. The PCAF notes “guidance on such financial products will be considered and
published in later editions of the Standard” (PCAF Standard, p. 44). The Task Force encourages asset owners to disclose GHG emissions for
additional financial products, where data are available or can be reasonably estimated, as methodologies are published.
82
The Task Force acknowledges the challenges and limitations of current carbon footprinting metrics, including that such metrics should not
necessarily be interpreted as risk metrics. The Task Force recognizes that some asset owners may be able to report weighted average carbon
intensity or GHG emissions for only a portion of their investments given data availability and methodological issues.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 42

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
In describing their targets, organizations should consider including the following:
‒ whether the target is absolute or intensity based;
‒ time frames over which the target applies;
‒ base year from which progress is measured; and
‒ key performance indicators used to assess progress against targets.
Organizations disclosing medium-term or long-term targets should also disclose
associated interim targets in aggregate or by business line, where available.
Where not apparent, organizations should provide a description of the methodologies
used to calculate targets and measures.

A.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 43

 4. Asset Managers
Asset managers, also known as investment managers, are hired by clients to invest assets on their
behalf. In this role, asset managers act as fiduciaries. Asset managers invest within the guidelines
specified by their clients for a given mandate set out in an investment management agreement or
product specification. Importantly, the investment results, whether positive or negative, belong to the
client.83

Asset managers’ clients, as owners of the underlying assets, bear the major portion of the potential
transition and physical risks to which their investments are exposed. Similarly, asset managers’ clients
will benefit from the potential returns on the investment opportunities associated with the transition
to a low-carbon economy. The relevance of climate-related risks and opportunities to an asset
manager and its asset owner clients will depend on a number of variables, including its investment
styles and objectives, the asset classes in which it invests, the investment mandates, as well as other
factors.

In the case where an asset manager is a public company, it has two distinct audiences for its climate-
A. related financial disclosures. The first audience is its shareholders, who need to understand
Introduction
enterprise-level risks and opportunities and how these are managed. The second is its clients, for
B. whom product-, investment strategy-, or client-specific disclosures are more relevant.
Recommendations
Asset managers’ clients rely on reporting from asset managers to understand how climate-related risks
C. and opportunities are managed within each of their portfolios. The guidance provided below
Guidance for All Sectors addresses considerations for asset managers when reporting to their clients.
D.
Supplemental Guidance Governance
for the Financial Sector
Disclose the organization’s governance around climate-related risks and opportunities.
E.
Supplemental Guidance
Recommended Guidance for All Sectors
for Non-Financial Groups Disclosure a) In describing the board’s oversight of climate-related issues, organizations should
Describe the consider including a discussion of the following:
F. board’s oversight of
‒ processes and frequency by which the board and/or board committees (e.g., audit,
Fundamental Principles climate-related
risk, or other committees) are informed about climate-related issues;
for Effective Disclosure risks and
opportunities. ‒ whether the board and/or board committees consider climate-related issues when
Appendices reviewing and guiding strategy, major plans of action, risk management policies,
annual budgets, and business plans as well as setting the organization’s
performance objectives, monitoring implementation and performance, and
overseeing major capital expenditures, acquisitions, and divestitures; and
‒ how the board monitors and oversees progress against goals and targets for
addressing climate-related issues.

Recommended Guidance for All Sectors

Disclosure b) In describing management’s role related to the assessment and management of climate-
Describe related issues, organizations should consider including the following information:
management’s role
‒ whether the organization has assigned climate-related responsibilities to
in assessing and
management-level positions or committees; and, if so, whether such management
managing climate-
positions or committees report to the board or a committee of the board and
related risks and
whether those responsibilities include assessing and/or managing climate-related
opportunities.
issues;
‒ a description of the associated organizational structure(s);
‒ processes by which management is informed about climate-related issues, and
‒ how management (through specific positions and/or management committees)
monitors climate-related issues.

83
Introductory language sourced from Blackrock, “BlackRock Worldwide Leader in Asset and Risk Management,” February 2019.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 44

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
Recommended Guidance for All Sectors
Disclosure a) Organizations should provide the following information:
Describe the
‒ a description of what they consider to be the relevant short-, medium-, and long-
climate-related
term horizons, taking into consideration the useful life of the organization’s assets
risks and
or infrastructure and the fact that climate-related issues often manifest
opportunities the
themselves over the medium and longer terms;
organization has
identified over the ‒ specific climate-related issues for each time horizon (short, medium, and long
short, medium, and term) that could have a material financial impact on the organization and
long term. distinguish whether the climate-related risks are transition or physical risks; and
‒ a description of the process(es) used to determine which risks and opportunities
could have a material financial impact on the organization.
Organizations should consider providing a description of their risks and opportunities by
A. sector and/or geography, as appropriate. In describing climate-related issues,
Introduction organizations should refer to Tables A1.1 and A1.2 (pp. 75–76).

B. Recommended Guidance for All Sectors

Recommendations Disclosure b) Building on recommended disclosure (a), organizations should discuss how identified
Describe the impact climate-related issues have affected their businesses, strategy, and financial planning.
C. of climate-related
Organizations should consider including the impact on their businesses, strategy, and
Guidance for All Sectors risks and
financial planning in the following areas:
opportunities on
D. the organization’s ‒ Products and services
Supplemental Guidance businesses, ‒ Supply chain and/or value chain
for the Financial Sector strategy, and
‒ Adaptation and mitigation activities
financial planning.
E. ‒ Investment in research and development
Supplemental Guidance
for Non-Financial Groups ‒ Operations (including types of operations and location of facilities)
‒ Acquisitions or divestments
F.
‒ Access to capital
Fundamental Principles
for Effective Disclosure Organizations should describe how climate-related issues serve as an input to their
financial planning process, the time period(s) used, and how these risks and
Appendices opportunities are prioritized. Organizations’ disclosures should reflect a holistic picture
of the interdependencies among the factors that affect their ability to create value over
time.
Organizations should describe the impact of climate-related issues on their financial
performance (e.g., revenues, costs) and financial position (e.g., assets, liabilities).84
If climate-related scenarios were used to inform the organization’s strategy and financial
planning, such scenarios should be described.
Organizations that have made GHG emissions reduction commitments, operate in
jurisdictions that have made such commitments, or have agreed to meet investor
expectations regarding GHG emissions reductions should describe their plans for
transitioning to a low-carbon economy, which could include GHG emissions targets and
specific activities intended to reduce GHG emissions in their operations and value chain
or to otherwise support the transition.85

84
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.
85
Organizations may agree to meet investor expectations regarding GHG emissions reductions for various reasons, including concerns about
access to or the cost of capital if they fail to do so.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 45

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
Supplemental Guidance for Asset Managers
Asset managers should describe how climate-related risks and opportunities are
factored into relevant products or investment strategies.
Asset managers should also describe how each product or investment strategy might be
affected by the transition to a low-carbon economy.

Recommended Guidance for All Sectors

Disclosure c) Organizations should describe how resilient their strategies are to climate-related risks
Describe the and opportunities, taking into consideration a transition to a low-carbon economy
resilience of the consistent with a 2°C or lower scenario and, where relevant to the organization,
organization’s scenarios consistent with increased physical climate-related risks.86
strategy, taking into
Organizations should consider discussing:
consideration
different climate- ‒ where they believe their strategies may be affected by climate-related risks and
A. related scenarios, opportunities;
Introduction
including a 2°C or ‒ how their strategies might change to address such potential risks and
lower scenario. opportunities;
B.
Recommendations ‒ the potential impact of climate-related issues on financial performance
(e.g., revenues, costs) and financial position (e.g., assets, liabilities);87 and
C.
‒ the climate-related scenarios and associated time horizon(s) considered.
Guidance for All Sectors
Refer to Section D in the Task Force’s report for information on applying scenarios to
D. forward-looking analysis.
Supplemental Guidance
for the Financial Sector
Risk Management
E.
Supplemental Guidance
Disclose how the organization identifies, assesses, and manages climate-related risks.
for Non-Financial Groups
Recommended Guidance for All Sectors
Disclosure a) Organizations should describe their risk management processes for identifying and
F.
Describe the assessing climate-related risks. An important aspect of this description is how
Fundamental Principles
for Effective Disclosure
organization’s organizations determine the relative significance of climate-related risks in relation to
processes for other risks.
Appendices identifying and
Organizations should describe whether they consider existing and emerging regulatory
assessing climate-
requirements related to climate change (e.g., limits on emissions) as well as other
related risks.
relevant factors considered.
Organizations should also consider disclosing the following:
‒ processes for assessing the potential size and scope of identified climate-related
risks and
‒ definitions of risk terminology used or references to existing risk classification
frameworks used.

Supplemental Guidance for Asset Managers

Asset managers should describe, where appropriate, engagement activity with investee
companies to encourage better disclosure and practices related to climate-related risks
in order to improve data availability and asset managers’ ability to assess climate-related
risks.
Asset managers should also describe how they identify and assess material climate-
related risks for each product or investment strategy. This might include a description of
the resources and tools used in the process.

86
In interpreting the phrase “2°C or lower,” organizations should consider aligning their scenario analysis with Article Two of the 2015 Paris
Agreement which commits parties to “holding the increasing in the global average temperature to well below 2°C above pre-industrial levels
and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”
87
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 46

 Risk Management
Disclose how the organization identifies, assesses, and manages climate-related risks.
Recommended Guidance for All Sectors
Disclosure b) Organizations should describe their processes for managing climate-related risks,
Describe the including how they make decisions to mitigate, transfer, accept, or control those risks.
organization’s In addition, organizations should describe their processes for prioritizing climate-related
processes for risks, including how materiality determinations are made within their organizations.
managing climate-
In describing their processes for managing climate-related risks, organizations should
related risks.
address the risks included in Tables A1.1 and A1.2 (pp. 75–76), as appropriate.

Supplemental Guidance for Asset Managers

Asset managers should describe how they manage material climate-related risks for
each product or investment strategy.

Recommended Guidance for All Sectors

Disclosure c) Organizations should describe how their processes for identifying, assessing, and
Describe how managing climate-related risks are integrated into their overall risk management.
A. processes for
Introduction identifying,
assessing, and
B. managing climate-
Recommendations related risks are
integrated into the
C. organization’s
Guidance for All Sectors overall risk
management.
D.
Supplemental Guidance
for the Financial Sector
Metrics and Targets
E. Disclose the metrics and targets used to assess and manage relevant climate-related risks and
Supplemental Guidance opportunities where such information is material.
for Non-Financial Groups
Recommended Guidance for All Sectors
F. Disclosure a) Organizations should provide the key metrics used to measure and manage climate-
Fundamental Principles Disclose the metrics related risks and opportunities, as described in Tables A1.1 and A1.2 (pp. 75–76), as well
for Effective Disclosure used by the as metrics consistent with the cross-industry, climate-related metric categories
organization to described in Table A2.1 (p. 79).88 Organizations should consider including metrics on
Appendices
assess climate- climate-related risks associated with water, energy, land use, and waste management
related risks and where relevant and applicable.
opportunities in
Where climate-related issues are material, organizations should consider describing
line with its strategy
whether and how related performance metrics are incorporated into remuneration
and risk
policies.
management
process. Where relevant, organizations should provide their internal carbon prices as well as
climate-related opportunity metrics such as revenue from products and services
designed for a low-carbon economy.
Metrics should be provided for historical periods to allow for trend analysis. Where
appropriate, organizations should consider providing forward-looking metrics for the
cross-industry, climate-related metric categories described in Table A2.1 (p. 79),
consistent with their business or strategic planning time horizons. In addition, where not
apparent, organizations should provide a description of the methodologies used to
calculate or estimate climate-related metrics.
Supplemental Guidance for Asset Managers
Asset managers should describe metrics used to assess climate-related risks and
opportunities in each product or investment strategy. Where relevant, asset managers
should also describe how these metrics have changed over time.

88
Financial organizations may find it more difficult to quantify exposure to climate-related risks because of challenges related to portfolio
aggregation and data availability. The Task Force suggests financial organizations provide qualitative and quantitative information, where data
and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 47

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Where appropriate, asset managers should provide metrics considered in investment
decisions and monitoring.
Asset managers should describe the extent to which their assets under management
and products and investment strategies, where relevant, are aligned with a well below
2°C scenario, using whichever approach or metrics best suit their organizational context
or capabilities.89, 90 Asset managers should also indicate which asset classes are included.

Recommended Guidance for All Sectors

Disclosure b) Organizations should provide their Scope 1 and Scope 2 GHG emissions independent of
Disclose Scope 1, a materiality assessment, and, if appropriate, Scope 3 GHG emissions and the related
Scope 2, and, if risks.91 All organizations should consider disclosing Scope 3 GHG emissions.92, 93
appropriate, Scope
GHG emissions should be calculated in line with the GHG Protocol methodology to allow
3 greenhouse gas
for aggregation and comparability across organizations and jurisdictions.94 As
(GHG) emissions,
appropriate, organizations should consider providing related, generally accepted
A. and the related
Introduction
industry-specific GHG efficiency ratios.95
risks.
GHG emissions and associated metrics should be provided for historical periods to allow
B. for trend analysis. In addition, where not apparent, organizations should provide a
Recommendations description of the methodologies used to calculate or estimate the metrics.

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

89
This could include forward-looking metrics, GHG emissions targets and progress against them, reducing emissions in their operations and
value chains, and engagement with investee companies on their transition to a low-carbon economy. The Task Force acknowledges that there
are challenges to implementing portfolio alignment methodologies, including the resources involved, and encourages organizations to
disclose qualitative and quantitative information given existing data and methodologies. The Portfolio Alignment Team’s, Measuring Portfolio
Alignment, October 2021 outlines potential approaches and associated design decisions for portfolio alignment tools.
90
While the Task Force’s supplemental guidance for asset managers addresses considerations when reporting to clients, the Task Force believes
an asset managers’ disclosure of the extent to which their assets under management are aligned with a well below 2°C scenario may also be
of interest to a wider range of stakeholders. As such, the Task Force encourages asset managers to disclose this information publicly, where
appropriate.
91
Emissions are a prime driver of rising global temperatures and, as such, are a key focal point of policy, regulatory, market, and technology
responses to limit climate change. As a result, organizations with significant emissions are likely to be impacted more significantly by
transition risk than other organizations. In addition, current or future constraints on emissions, either directly by emission restrictions or
indirectly through carbon budgets, may impact organizations financially.
92
The Task Force strongly encourages all organizations to disclose Scope 3 GHG emissions. While the Task Force recognizes the data and
methodological challenges associated with calculating Scope 3 GHG emissions, it believes such emissions are an important metric reflecting
an organization’s exposure to climate-related risks and opportunities. For guidance on reporting Scope 3 GHG emissions, see the GHG
Protocol’s The Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
93
When considering whether to disclose Scope 3 GHG emissions, organizations should consider whether such emissions are a significant
portion of their total GHG emissions. For example, see discussion of 40% threshold in the Science Based Targets initiative’s (SBTi’s) paper SBTi
Criteria and Recommendations, Version 4.2, April 2021, Section V, p. 10.
94
While challenges remain, the GHG Protocol methodology is the most widely recognized and used international standard for calculating GHG
emissions. Organizations may use national reporting methodologies if they are consistent with the GHG Protocol methodology.
95
For industries with high energy consumption, metrics related to emission intensity are important to provide. For example, emissions per unit
of economic output (e.g., unit of production, number of employees, or value-added) is widely used.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 48

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Supplemental Guidance for Asset Managers
Asset managers should disclose GHG emissions for their assets under management and
the weighted average carbon intensity (WACI) for each product or investment strategy,
where data and methodologies allow. These emissions should be calculated in line with
the Global GHG Accounting and Reporting Standard for the Financial Industry developed by
the Partnership for Carbon Accounting Financials (PCAF Standard) or a comparable
methodology (See Table 2, p. 50).96
In addition to WACI, asset managers should consider providing other carbon footprinting
metrics they believe are useful for decision-making. See Table 3 (p. 52) for additional
carbon footprinting and exposure metrics.97

Recommended Guidance for All Sectors

Disclosure c) Organizations should describe their key climate-related targets such as those related to
Describe the GHG emissions, water usage, energy usage, etc., consistent with the cross-industry,
A. targets used by the climate-related metric categories in Table A2.1 (p. 79), where relevant, and in line with
Introduction organization to anticipated regulatory requirements or market constraints or other goals. Other goals
manage climate- may include efficiency or financial goals, financial loss tolerances, avoided GHG
B. related risks and emissions through the entire product life cycle, or net revenue goals for products and
Recommendations opportunities and services designed for a low-carbon economy.
performance
C. In describing their targets, organizations should consider including the following:
against targets.
Guidance for All Sectors ‒ whether the target is absolute or intensity based;

D.
‒ time frames over which the target applies;
Supplemental Guidance ‒ base year from which progress is measured; and
for the Financial Sector
‒ key performance indicators used to assess progress against targets.
E. Organizations disclosing medium-term or long-term targets should also disclose
Supplemental Guidance associated interim targets in aggregate or by business line, where available.
for Non-Financial Groups
Where not apparent, organizations should provide a description of the methodologies
F.
used to calculate targets and measures.
Fundamental Principles
for Effective Disclosure

Appendices

96
The Task Force recognizes the PCAF Standard currently does not provide explicit guidance on calculating GHG emissions for certain financial
products including private equity that refers to investment funds, green bonds, sovereign bonds, loans for securitization, exchange traded
funds, derivatives, and initial public offering (IPO) underwriting. The PCAF notes “guidance on such financial products will be considered and
published in later editions of the Standard” (PCAF Standard, p. 44). The Task Force encourages asset managers to disclose GHG emissions for
additional financial products, where data are available or can be reasonably estimated, as methodologies are published.
97
The Task Force acknowledges the challenges and limitations of current carbon footprinting metrics, including that such metrics should not
necessarily be interpreted as risk metrics. The Task Force recognizes that some asset managers may be able to report weighted average
carbon intensity or GHG emissions for only a portion of the assets they manage given data availability and methodological issues.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 49

 5. Carbon Footprinting and Exposure Metrics
The tables below provide descriptions, formulas, and additional information for common carbon
footprinting and exposure metrics. Table 2 provides details on GHG emissions metrics for banks, asset
owners, and asset managers. Table 3 (p. 52) provides carbon footprinting metrics that organizations
may find useful to report, including weighted average carbon intensity for both investing and
insurance underwriting activities.

Table 2
GHG Emissions Metrics for Banks, Asset Owners, and Asset Managers
Activities
Asset Class Description Formula Lending Investing

Listed Equity that is traded -- ✓

Outstanding amountc
Equity on a stock exchange ∑( × Company emissionsc)
or another securities EVICc
c
exchange and is on EVIC = enterprise value including cash98
the balance sheet of c = borrower or investee company
A. the financial Note: the value of outstanding listed equity is
Introduction institution. defined based on its market value (i.e., market
price times number of shares). See page 49 of the
B.
PCAF Standard.
Recommendations
Listed Listed corporate To private companies: -- ✓
C. Corporate bonds that are
Outstanding amountc
Guidance for All Sectors Bonds traded on a market ∑( × Company emissionsc)
and are on the Total equity + debtc
c
D. balance sheet of the c = borrower or investee company
Supplemental Guidance financial institution.
for the Financial Sector To listed companies:

E.
Supplemental Guidance Outstanding amountc
∑( × Company emissionsc)
for Non-Financial Groups EVICc
c
EVIC = enterprise value including cash
F.
Fundamental Principles
c = borrower or investee company
for Effective Disclosure
Note: the value of outstanding corporate bonds is
Appendices defined based on the book value of the debt that
the borrower owes to the lender. See page 49 of
the PCAF Standard.

Business All loans and lines of To listed companies: ✓ --

Loans credit for general
Outstanding amountc
corporate purposes ∑( × Company emissionsc)
to businesses, EVICc
c
nonprofits, and any
other structure of To private companies:
organization that are
not traded on a Outstanding amountc
∑( × Company emissionsc)
market and are on Total equity + 𝑑𝑒𝑏𝑡𝑐
the balance of the c

financial institution.
EVIC = enterprise value including cash
c = borrower or investee company

98
PCAF Standard aligns with the definition of EVIC as provided by the EU Technical Expert Group on Sustainable Finance’s Handbook on Climate
Benchmarks and benchmarks’ ESG disclosures, defined as: “The sum of the market capitalization of ordinary shares at fiscal year-end, the
market capitalization of preferred shares at fiscal year-end, and the book values of total debt and minorities’ interests. No deductions of cash
or cash equivalents are made to avoid the possibility of negative enterprise values” (PCAF Standard, p. 62).

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 50

 Table 2
GHG Emissions Metrics for Banks, Asset Owners, and Asset Managers (continued)
Activities
Asset Class Description Formula Lending Investing

Unlisted All equity -- ✓

Outstanding amountc
Equity investments for ∑( × Company emissionsc)
general corporate Total equity + debtc
c
purposes to
businesses, c = borrower or investee company
nonprofits, and any
other structure of Note: the outstanding amount is the outstanding
organization that are value of equity that the financial institution holds
not traded on a in the private company. It is calculated by
market and are on multiplying the relative share of the financial
the balance sheet of institution in the respective investee by the total
the financial equity of the respective investee according to its
institution. balance sheet. See pp. 61-62 of the PCAF Standard.
A.
Project All loans or equities ✓ ✓
Introduction to projects for Outstanding amountp
Finance ∑ ( × Project emissionsp)
specific purposes Total equity + debtp
p
B. that are on the
Recommendations balance sheet of the p = project
financial institution.
C.
Guidance for All Sectors Commercial On-balance sheet Outstanding amountb ✓ ✓
× 𝐸𝑛𝑒𝑟𝑔𝑦 𝑐𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛𝑏,𝑒
Real Estate loans and ∑ (Property value at originationb )
(CRE) investments for the × 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑓𝑎𝑐𝑡𝑜𝑟𝑒
D. b

Supplemental Guidance purchase and

for the Financial Sector refinance of b = building
commercial real
e = energy source
E. estate (CRE).
Supplemental Guidance
for Non-Financial Groups Mortgages On-balance sheet ✓ --
loans for the
Outstanding amountb
F. purchase and × 𝐸𝑛𝑒𝑟𝑔𝑦 𝑐𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛𝑏,𝑒
∑ (Property value at originationb )
Fundamental Principles refinance of × 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑓𝑎𝑐𝑡𝑜𝑟𝑒
b
for Effective Disclosure residential property,
including individual
Appendices homes and b = building
multifamily homes e = energy source
with a small
number of units.

Motor On-balance sheet Outstanding amountv ✓ --

× 𝐷𝑖𝑠𝑡𝑎𝑛𝑐𝑒 𝑡𝑟𝑎𝑣𝑒𝑙𝑒𝑑𝑣
Vehicle loans and lines of ∑ (Total value at originationv )
× 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 𝑣,𝑓 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑓𝑎𝑐𝑡𝑜𝑟𝑓
×
Loans credit to businesses v, f

and consumers that

are used to finance v = vehicle or vehicle fleet
one or several
f = fuel type
motor vehicles.

Note: PCAF continues to add asset classes. Financial organizations (referred to as financial institutions by PCAF) should
refer to the PCAF Standard for the latest guidance on measuring GHG emissions. 99

99
For further details on these metrics, see PCAF, The Global GHG Accounting and Reporting Standard for the Financial Industry, November 2020.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 51

 Table 3
Common Carbon Footprinting and Exposure Metrics
Metric Supporting Information

Weighted Description Portfolio’s exposure to carbon-intensive companies, expressed in tons CO2e/$M

Average revenue.
Carbon i
Formula current value of investmenti issuer ' s Scope 1 and Scope 2 GHG emissionsi
Intensity: ∑ ( current portfolio value
×
issuer ' s $M revenuei
)
n
Investments
Methodology Scope 1 and Scope 2 GHG emissions are allocated based on portfolio weights
(the current value of the investment relative to the current portfolio value),
rather than the equity ownership approach (as described under methodology
for Total Carbon Emissions). Gross values should be used.

Key Points + Metric can be more easily applied across asset classes since it does not rely
+/- on equity ownership approach.
+ The calculation of this metric is fairly simple and easy to communicate to
investors.
A.
Introduction + Metric allows for portfolio decomposition and attribution analysis.
− Metric is sensitive to outliers.
B.
− Using revenue (instead of physical or other metrics) to normalize the data
Recommendations
tends to favor companies with higher pricing levels relative to their peers.

C. Description Portfolio of insurance transactions’ exposure to carbon-intensive companies,

Weighted
Guidance for All Sectors expressed in tons CO2e/$M revenue.
Average
Carbon i
gross written premium of insurance transaction insured' s Scope 1 and Scope 2 GHG emissionsi
D. Formula ∑ ( × )
Intensity: total GWP volume of insurance portfolio insured' s $M revenuei
Supplemental Guidance n
for the Financial Sector Insurance
Premiums100 Methodology The methodology measures the intensity of a portfolio of insurance transactions
E. using carbon intensity information for each legal entity or company (commercial
Supplemental Guidance insurance) or individual insured (personal lines insurance) should be used.
for Non-Financial Groups Where GHG emissions on a company level are not available, industry or country
information can be used. Where gross written premium information is not
F. available, information on capital required, capacity, or expected loss can be
Fundamental Principles used.
for Effective Disclosure
Key Points + Metric can be more easily applied across asset classes since it does not rely on
Appendices +/- equity ownership approach.
- Using revenue to normalize the data tends to favor companies with higher
pricing levels relative to their peers.

Total Carbon Description The absolute greenhouse gas emissions associated with a portfolio, expressed
Emissions in tons CO2e.

Formula i
current value of investmenti
∑ (issuer' s market capitalization ×issuer's Scope 1 and Scope 2 GHG emissionsi)
i
n

Methodology Scope 1 and Scope 2 GHG emissions are allocated to investors based on an
equity ownership approach. Under this approach, if an investor owns 5 percent
of a company’s total market capitalization, then the investor owns 5 percent of
the company as well as 5 percent of the company’s GHG (or carbon) emissions.
While this metric is generally used for public equities, it can be used for other
asset classes by allocating GHG emissions across the total capital structure of
the investee (debt and equity).

100
Source: CRO Forum, “Carbon footprinting methodology for underwriting portfolios,” May 1 2020.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 52

 Table 3
Common Carbon Footprinting and Exposure Metrics (continued)
Metric Supporting Information

Total Carbon Key Points + Metric may be used to communicate the carbon footprint of a portfolio
Emissions consistent with the GHG protocol.
+ Metric may be used to track changes in GHG emissions in a portfolio.
+ Metric allows for portfolio decomposition and attribution analysis.
− Metric is generally not used to compare portfolios because the data are not
normalized.
− Changes in underlying companies’ market capitalization can be
misinterpreted.

Carbon Description Total carbon emissions for a portfolio normalized by the market value of the
Footprint portfolio, expressed in tons CO2e/$M invested.

Formula i
current value of investmenti
∑ ( ×issuer's Scope 1 and Scope 2 GHG emissionsi)
A. issuer ' s market capitalization i
n
Introduction
current portfolio value ($M)

B. Methodology Scope 1 and Scope 2 GHG emissions are allocated to investors based on an
Recommendations equity ownership approach as described under methodology for Total Carbon
Emissions.
C.
The current portfolio value is used to normalize the data.
Guidance for All Sectors
Key Points + Metric may be used to compare portfolios to one another and/or to a
D. +/- benchmark.
Supplemental Guidance + Using the portfolio market value to normalize data is fairly intuitive to
for the Financial Sector investors.
+ Metric allows for portfolio decomposition and attribution analysis.
E.
Supplemental Guidance − Metric does not take into account differences in the size of companies
for Non-Financial Groups (e.g., does not consider the carbon efficiency of companies).
− Changes in underlying companies’ market capitalization can be
F. misinterpreted.
Fundamental Principles
for Effective Disclosure Carbon Description Volume of carbon emissions per million dollars of revenue (carbon efficiency of
Intensity a portfolio), expressed in tons CO2e/$M revenue.
Appendices
Formula i
current value of investmenti
∑ ( ×issuer's Scope 1 and Scope 2 GHG emissionsi)
issuer ' s market capitalization i
n
i
current value of investmenti
∑ ( ×issuer's $M revenuei)
issuer ' s market capitalization i
n

Methodology Scope 1 and Scope 2 GHG emissions are allocated to investors based on an
equity ownership approach as described under methodology for Total Carbon
Emissions.
The company’s (or issuer’s) revenue is used to adjust for company size to
provide a measurement of the efficiency of output.

Key Points + Metric may be used to compare portfolios to one another and/or to a
+/- benchmark.
+ Metric takes into account differences in the size of companies (e.g., considers
the carbon efficiency of companies).
+ Metric allows for portfolio decomposition and attribution analysis.
− The calculation of this metric is somewhat complex and may be difficult to
communicate.
− Changes in underlying companies’ market capitalization can be
misinterpreted.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 53

 Table 3
Common Carbon Footprinting and Exposure Metrics (continued)
Metric Supporting Information

Exposure to Description The amount or percentage of carbon-related assets101 in the portfolio,

Carbon- expressed in $M or percentage of the current portfolio value.
Related
Formula for Amount
i
Assets ∑ $M current value of investments in carbon-related assets
n

Formula for Percentage ∑ current value of investments in carbon-related assets

×100
current portfolio value

Methodology This metric focuses on a portfolio’s exposure to sectors and industries

considered the most GHG emissions intensive. Gross values should be used.

Key Points + Metric can be applied across asset classes and does not rely on underlying
+/- companies’ Scope 1 and Scope 2 GHG emissions.
‒ Metric does not provide information on sectors or industries other than those
A. included in the definition of carbon-related assets (i.e., energy and utilities
Introduction sectors under the Global Industry Classification Standard excluding water
utilities and independent power and renewable electricity producer
B. industries).
Recommendations
Note: The term “portfolio” used in the table above is defined as “fund or investment strategy” for asset owners, “product or
C. investment strategy” for asset managers, and “lending and other financial intermediary business activities” for banks.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

101
Recognizing that the term “carbon-related assets“ is not well defined, the Task Force encourages banks to use a consistent definition to
support comparability. For purposes of disclosing information on significant concentrations of credit exposure to carbon-related assets under
this framework, the Task Force suggests banks define carbon-related assets as those assets tied to the four non-financial groups identified by
the Task Force in its 2017 report (see Table 4, p. 56). There may be industries or sub-industries that are appropriate to exclude, such as water
utilities and independent power and renewable electricity producer industries. Banks should describe which industries they include.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 54

 E.
Supplemental
Guidance for
Non-Financial
Groups
A.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 55

 E. Supplemental Guidance for Non-Financial Groups
While every industry could experience potential financial impacts from climate-related risks and
opportunities, the Task Force developed supplemental guidance for non-financial industries (and their
related supply and distribution chains) more likely to be financially impacted than others due to their
exposure to certain transition and physical risks around greenhouse gas (GHG) emissions, energy, or
water dependencies associated with their operations and products.102 These non-financial industries
are grouped into four key areas (referred to as non-financial groups): Energy; Transportation; Materials
and Buildings; and Agriculture, Food, and Forest Products.103 The industries within each group are
provided in Table 4.104

Table 4
Industries Associated with the Four Non-Financial Groups
Materials and Agriculture, Food, and
Energy Transportation Buildings Forest Products
− Oil and Gas − Air Freight − Metals and Mining − Beverages
− Coal − Passenger Air − Chemicals − Agriculture
− Electric Utilities Transportation − Construction − Packaged Food and
− Maritime Materials Meats
A.
Transportation − Capital Goods − Paper and Forest
Introduction
− Rail Transportation − Real Estate Products
B. − Trucking Services Management and
Recommendations − Automobiles and Development
Components
C.
Guidance for All Sectors

D.
Supplemental Guidance Supplemental guidance for the non-financial groups is provided for select recommended disclosures
for the Financial Sector
related to strategy and metrics and targets, as shown in Figure 8.
E.
Supplemental Guidance
Figure 8
for Non-Financial Groups
Supplemental Guidance for Non-Financial Groups
F.
Risk Metrics and
Fundamental Principles Governance Strategy
Management Targets
for Effective Disclosure
Groups a) b) a) b) c) a) b) c) a) b) c)
Appendices
Energy

Transportation

Materials and Buildings

Ag, Food, and Forest Products

The Task Force developed supplemental guidance for the non-financial groups to provide such
organizations further background and information to consider when developing disclosures consistent
with the Task Force’s recommendations. This supplemental guidance should be read and applied in
conjunction with the guidance for all sectors.

102
SASB, SASB Climate Risk Technical Bulletin #: TB001-10182016, October 2016.
103
These four groups and their associated industries are intended to be indicative of the economic activities associated with these industries
rather than definitive industry categories.
104
Box 2 of the 2017 report provides more details on the selection of these four groups.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 56

 Governance
Disclose the organization’s governance around climate-related risks and opportunities.

Recommended Guidance for All Sectors

Disclosure a) In describing the board’s oversight of climate-related issues, organizations should
Describe the consider including a discussion of the following:
board’s oversight of
‒ processes and frequency by which the board and/or board committees (e.g., audit,
climate-related
risk, or other committees) are informed about climate-related issues;
risks and
opportunities. ‒ whether the board and/or board committees consider climate-related issues when
reviewing and guiding strategy, major plans of action, risk management policies,
annual budgets, and business plans as well as setting the organization’s
performance objectives, monitoring implementation and performance, and
overseeing major capital expenditures, acquisitions, and divestitures; and
‒ how the board monitors and oversees progress against goals and targets for
addressing climate-related issues.

Recommended Guidance for All Sectors

Disclosure b) In describing management’s role related to the assessment and management of climate-
Describe related issues, organizations should consider including the following information:
management’s role
‒ whether the organization has assigned climate-related responsibilities to
A. in assessing and
management-level positions or committees; and, if so, whether such management
Introduction managing climate-
positions or committees report to the board or a committee of the board and
related risks and
whether those responsibilities include assessing and/or managing climate-related
B. opportunities.
issues;
Recommendations
‒ a description of the associated organizational structure(s);
C. ‒ processes by which management is informed about climate-related issues; and
Guidance for All Sectors
‒ how management (through specific positions and/or management committees)
monitors climate-related issues.
D.
Supplemental Guidance

Strategy
for the Financial Sector

E. Disclose the actual and potential impacts of climate-related risks and opportunities on the
Supplemental Guidance
organization’s businesses, strategy, and financial planning where such information is material.
for Non-Financial Groups
Recommended Guidance for All Sectors
F. Disclosure a) Organizations should provide the following information:
Fundamental Principles Describe the
for Effective Disclosure ‒ a description of what they consider to be the relevant short-, medium-, and long-
climate-related
term time horizons, taking into consideration the useful life of the organization’s
risks and
Appendices assets or infrastructure and the fact that climate-related issues often manifest
opportunities the
themselves over the medium and longer terms;
organization has
identified over the ‒ a description of the specific climate-related issues potentially arising in each time
short, medium, and horizon (short, medium, and long term) that could have a material financial impact
long term. on the organization; and
‒ a description of the process(es) used to determine which risks and opportunities
could have a material financial impact on the organization.
Organizations should consider providing a description of their risks and opportunities by
sector and/or geography, as appropriate. In describing climate-related issues,
organizations should refer to Tables A1.1 and A1.2 (pp. 75–76).

Recommended Guidance for All Sectors

Disclosure b) Building on recommended disclosure (a), organizations should discuss how identified
Describe the impact climate-related issues have affected their businesses, strategy, and financial planning.
of climate-related
Organizations should consider including the impact on their businesses, strategy, and
risks and
financial planning in the following areas:
opportunities on
the organization’s ‒ Products and services
businesses, ‒ Supply chain and/or value chain
strategy, and
‒ Adaptation and mitigation activities

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 57

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
financial planning. ‒ Investment in research and development
‒ Operations (including types of operations and location of facilities)
‒ Acquisitions or divestments
‒ Access to capital
Organizations should describe how climate-related issues serve as an input to their
financial planning process, the time period(s) used, and how these risks and
opportunities are prioritized. Organizations’ disclosures should reflect a holistic picture
of the interdependencies among the factors that affect their ability to create value over
time.
Organizations should describe the impact of climate-related issues on their financial
performance (e.g., revenues, costs) and financial position (e.g., assets, liabilities).105
If climate-related scenarios were used to inform the organization’s strategy and financial
planning, such scenarios should be described.
Organizations that have made GHG emissions reduction commitments, operate in
jurisdictions that have made such commitments, or have agreed to meet investor
A.
expectations regarding GHG emissions reductions should describe their plans for
Introduction
transitioning to a low-carbon economy, which could include GHG emissions targets and
specific activities intended to reduce GHG emissions in their operations and value chain
B.
or to otherwise support the transition.106
Recommendations
Supplemental Guidance for Non-Financial Groups
C. Organizations should consider discussing how climate-related risks and opportunities
Guidance for All Sectors are integrated into their (1) current decision-making and (2) strategy formulation,
including planning assumptions and objectives around climate change mitigation,
D. adaptation, or opportunities such as:
Supplemental Guidance
‒ Research and development (R&D) and adoption of new technology.
for the Financial Sector
‒ Existing and committed future activities such as investments, restructuring, write-
E. downs, or impairment of assets.
Supplemental Guidance
‒ Critical planning assumptions around legacy assets, for example, strategies to
for Non-Financial Groups
lower carbon-, energy-, and/or water-intensive operations.
F. ‒ How GHG emissions, energy, and water and other physical risk exposures, if
Fundamental Principles applicable, are considered in capital planning and allocation; this could include a
for Effective Disclosure discussion of major acquisitions and divestments, joint-ventures, and investments
in technology, innovation, and new business areas in light of changing climate-
Appendices
related risks and opportunities.
‒ The organization’s flexibility in positioning/repositioning capital to address
emerging climate-related risks and opportunities.

Recommended Guidance for All Sectors

Disclosure c) Organizations should describe how resilient their strategies are to climate-related risks
Describe the and opportunities, taking into consideration a transition to a low-carbon economy
resilience of the consistent with a 2°C or lower scenario and, where relevant to the organization,
organization’s scenarios consistent with increased physical climate-related risks.107
strategy, taking into
Organizations should consider discussing:
consideration
different climate- ‒ where they believe their strategies may be affected by climate-related risks and
related scenarios, opportunities;

105
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.
106
Organizations may agree to meet investor expectations regarding GHG emissions reductions for various reasons, including concerns about
access to or the cost of capital if they fail to do so.
107
In interpreting the phrase “2°C or lower,” organizations should consider aligning their scenario analysis with Article Two of the 2015
Paris Agreement which commits parties to “holding the increasing in the global average temperature to well below 2°C above pre-industrial
levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 58

 Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning where such information is material.
including a 2°C or ‒ how their strategies might change to address such potential risks and
lower scenario. opportunities;
‒ the potential impact of climate-related issues on financial performance
(e.g., revenues, costs) and financial position (e.g., assets, liabilities);108 and
‒ the climate-related scenarios and associated time horizon(s) considered.
Refer to Section D in the Task Force’s report for information on applying scenarios to
forward-looking analysis.
Supplemental Guidance for Non-Financial Groups
Organizations with more than one billion U.S. dollar equivalent (USDE) in annual revenue
should consider conducting more robust scenario analysis to assess the resilience of
their strategies against a range of climate-related scenarios, including a 2°C or lower
scenario and, where relevant to the organization, scenarios consistent with increased
physical climate-related risks.109, 110
Organizations should consider discussing the implications of different policy
assumptions, macro-economic trends, energy pathways, and technology assumptions
used in publicly available climate-related scenarios to assess the resilience of their
A.
Introduction
strategies.111
For the climate-related scenarios used, organizations should consider providing
B. information on the following factors to allow investors and others to understand how
Recommendations conclusions were drawn from scenario analysis:
‒ Critical input parameters, assumptions, and analytical choices for the climate-
C.
related scenarios used, particularly as they relate to key areas such as policy
Guidance for All Sectors
assumptions, energy deployment pathways, technology pathways, and related
D. timing assumptions.
Supplemental Guidance ‒ Potential qualitative or quantitative financial implications of the climate-related
for the Financial Sector scenarios, if any.112

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

108
These impacts may be described in qualitative, quantitative, or a combination of both qualitative and quantitative terms. The Task Force
encourages organizations to include quantitative information, where data and methodologies allow.
109
The Task Force expects the application of scenarios as a tool for forward-looking assessments of climate-related risk will evolve over time as
scenarios, tools, and data are further developed and refined.
110
Inclusion of a 2°C or lower scenario is intended to serve as an anchor point for all organizations that aligns with current international climate
agreements, recognizing that the Paris Agreement currently says “well below 2 degrees.”
111
This will help identify the key characteristics that are relevant to assessing long-term strategy (e.g., changes in regulation, technology, and
physical impact).
112
In discussing potential qualitative or quantitative financial implications, the Task Force is not asking organizations to provide a financial
forecast (for which scenario analysis is not appropriate). Organizations are asked to provide an indication of direction or ranges of potential
financial implications, for example, directionally where key financial aspects such as CapEx, R&D, supply chains, or revenue might be headed.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 59

 Risk Management
Disclose how the organization identifies, assesses, and manages climate-related risks.

Recommended Guidance for All Sectors

Disclosure a) Organizations should describe their risk management processes for identifying and
Describe the assessing climate-related risks. An important aspect of this description is how
organization’s organizations determine the relative significance of climate-related risks in relation to
processes for other risks.
identifying and
Organizations should describe whether they consider existing and emerging regulatory
assessing climate-
requirements related to climate change (e.g., limits on emissions) as well as other
related risks.
relevant factors considered.
Organizations should also consider disclosing the following:
‒ processes for assessing the potential size and scope of identified climate-related
risks and
‒ definitions of risk terminology used or references to existing risk classification
frameworks used.

Recommended Guidance for All Sectors

Disclosure b) Organizations should describe their processes for managing climate-related risks,
Describe the including how they make decisions to mitigate, transfer, accept, or control those risks. In
A. organization’s addition, organizations should describe their processes for prioritizing climate-related
Introduction processes for risks, including how materiality determinations are made within their organizations.
managing climate-
In describing their processes for managing climate-related risks, organizations should
B. related risks.
Recommendations
address the risks included in Tables A1.1 and A1.2 (pp. 75–76), as appropriate.

Recommended Guidance for All Sectors

C.
Disclosure c) Organizations should describe how their processes for identifying, assessing, and
Guidance for All Sectors
Describe how managing climate-related risks are integrated into their overall risk management.
processes for
D.
identifying,
Supplemental Guidance
for the Financial Sector assessing, and
managing climate-
E. related risks are
Supplemental Guidance integrated into the
for Non-Financial Groups organization’s
overall risk
F. management.
Fundamental Principles
for Effective Disclosure
Metrics and Targets
Appendices
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.

Recommended Guidance for All Sectors

Disclosure a) Organizations should provide the key metrics used to measure and manage climate-
Disclose the metrics related risks and opportunities, as described in Tables A1.1 and A1.2 (pp. 75–76), as well
used by the as metrics consistent with the cross-industry, climate-related metric categories
organization to described in Table A2.1 (p. 79).113 Organizations should consider including metrics on
assess climate- climate-related risks associated with water, energy, land use, and waste management
related risks and where relevant and applicable.
opportunities in
Where climate-related issues are material, organizations should consider describing
line with its strategy
whether and how related performance metrics are incorporated into remuneration
and risk
policies.
management
process. Where relevant, organizations should provide their internal carbon prices as well as
climate-related opportunity metrics such as revenue from products and services
designed for a low-carbon economy.

113
Financial organizations may find it more difficult to quantify exposure to climate-related risks because of challenges related to portfolio
aggregation and data availability. The Task Force suggests financial organizations provide qualitative and quantitative information, where
data and methodologies allow.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 60

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Metrics should be provided for historical periods to allow for trend analysis. Where
appropriate, organizations should consider providing forward-looking metrics for the
cross-industry, climate-related metric categories described in Table A2.1 (p. 79),
consistent with their business or strategic planning time horizons. In addition, where not
apparent, organizations should provide a description of the methodologies used to
calculate or estimate climate-related metrics.
Supplemental Guidance for Non-Financial Groups
For all relevant metrics, organizations should consider providing historical trends and
forward-looking projections (by relevant country and/or jurisdiction, business line, or
asset type). Organizations should also consider disclosing metrics that support their
scenario analysis and strategic planning process and that are used to monitor the
organization’s business environment from a strategic and risk management perspective.
Organizations should consider providing key metrics related to GHG emissions, energy,
water and other physical risk exposures, land use, and, if relevant, investments in
climate adaptation and mitigation that address potential financial aspects of shifting
demand, expenditures, asset valuation, and cost of financing.
A. Recommended Guidance for All Sectors
Introduction Disclosure b) Organizations should provide their Scope 1 and Scope 2 GHG emissions independent of
Disclose Scope 1, a materiality assessment, and, if appropriate, Scope 3 GHG emissions and the related
B.
Scope 2, and, if risks.114 All organizations should consider disclosing Scope 3 GHG emissions.115, 116
Recommendations
appropriate, Scope
GHG emissions should be calculated in line with the GHG Protocol methodology to allow
3 greenhouse gas
C. for aggregation and comparability across organizations and jurisdictions.117 As
(GHG) emissions,
Guidance for All Sectors appropriate, organizations should consider providing related, generally accepted
and the related
industry-specific GHG efficiency ratios.118
risks.
D.
GHG emissions and associated metrics should be provided for historical periods to allow
Supplemental Guidance
for trend analysis. In addition, where not apparent, organizations should provide a
for the Financial Sector
description of the methodologies used to calculate or estimate the metrics.
E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

114
Emissions are a prime driver of rising global temperatures and, as such, are a key focal point of policy, regulatory, market, and technology
responses to limit climate change. As a result, organizations with significant emissions are likely to be impacted more significantly by
transition risk than other organizations. In addition, current or future constraints on emissions, either directly by emission restrictions or
indirectly through carbon budgets, may impact organizations financially.
115
The Task Force strongly encourages all organizations to disclose Scope 3 GHG emissions. While the Task Force recognizes the data and
methodological challenges associated with calculating Scope 3 GHG emissions, it believes such emissions are an important metric reflecting
an organization’s exposure to climate-related risks and opportunities. For guidance on reporting Scope 3 GHG emissions, see the GHG
Protocol’s The Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
116
When considering whether to disclose Scope 3 GHG emissions, organizations should consider whether such emissions are a significant
portion of their total GHG emissions. For example, see discussion of 40% threshold in the Science Based Targets initiative’s (SBTi’s) paper SBTi
Criteria and Recommendations, Version 4.2, April 2021, Section V, p. 10.
117
While challenges remain, the GHG Protocol methodology is the most widely recognized and used international standard for calculating GHG
emissions. Organizations may use national reporting methodologies if they are consistent with the GHG Protocol methodology.
118
For industries with high energy consumption, metrics related to emission intensity are important to provide. For example, emissions per unit
of economic output (e.g., unit of production, number of employees, or value-added) is widely used.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 61

 Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and
opportunities where such information is material.
Recommended Guidance for All Sectors
Disclosure c) Organizations should describe their key climate-related targets such as those related to
Describe the GHG emissions, water usage, energy usage, etc., consistent with the cross-industry,
targets used by the climate-related metric categories in Table A2.1 (p. 79), where relevant, and in line with
organization to anticipated regulatory requirements or market constraints or other goals. Other goals
manage climate- may include efficiency or financial goals, financial loss tolerances, avoided GHG
related risks and emissions through the entire product life cycle, or net revenue goals for products and
opportunities and services designed for a low-carbon economy.
performance
In describing their targets, organizations should consider including the following:
against targets.
‒ whether the target is absolute or intensity based;
‒ time frames over which the target applies;
‒ base year from which progress is measured; and
‒ key performance indicators used to assess progress against targets.
Organizations disclosing medium-term or long-term targets should also disclose
associated interim targets in aggregate or by business line, where available.
A.
Introduction
Where not apparent, organizations should provide a description of the methodologies
used to calculate targets and measures.
B.
Recommendations
The following sections provide a description of how each of the four key non-financial groups may be
C.
affected by climate-related issues along with a few examples of metrics that may be relevant to the
Guidance for All Sectors
group. The Task Force has also identified cross-industry, climate-related metric categories it believes
D. are relevant for all organizations (Table A2.1, p. 79). In addition, organizations in these groups should
Supplemental Guidance define metrics and targets that are tailored to their particular climate-related risks and opportunities.
for the Financial Sector
In determining the most relevant and useful metrics, organizations are encouraged to engage with
E. their key stakeholders, including investors, and review publicly available frameworks.119
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

119
Existing frameworks provide a range of metrics that an organization may find useful in disclosing various aspects of its climate-related risks
and opportunities. See, for example, GHG Protocol, Global Reporting Initiative, ISO Standards, Sustainability Accounting Standards Board,
Climate Disclosure Standards Board, World Resources Institute, World Business Council for Sustainable Development, CDP, and various
industry-specific guidance.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 62

 1. Energy Group
Energy is a critical element in the economy, serving as a primary or necessary input in most economic
activities. This group comprises organizations extracting, processing, producing, and distributing fossil
fuels or electric energy to other sectors of the economy. It includes, but is not limited to, industries
listed in Figure 9.

While many climate-related issues impact the

Energy Group, organizations in this group should Figure 9

consider providing disclosures related to financial Energy Group

implications of potential physical impacts Industry/Sub-Industry
(e.g., reliance on water in areas of high water
Oil and Gas
stress, severe storm/flood mitigations) and Group
transition impacts (e.g., policy requirements, Energy Coal
carbon prices, new technology, changes in market
demand) of climate-related risks and Electric Utilities
opportunities.

As fossil fuel and electricity providers, the

organizations in this group generally have significant financial exposure around transition issues
A.
related to GHG emissions and, in many cases, are dependent on the availability of water. For example,
Introduction
a majority of the current electricity supply comes from non-renewable fossil fuel resources, resulting in
B. a significant exposure to transitions around global GHG emissions—either directly through utility
Recommendations companies’ own energy use for production or indirectly through combustion of fossil fuels.120 Electric
utilities, therefore, face significant transition risk (i.e., the financial risk arising from the changes in
C.
asset valuations caused by the structural shift toward a low-carbon energy system). This is because the
Guidance for All Sectors
utility sector’s asset valuations are at risk from the disruptive impact of the policy, technology, and
D. portfolio changes that will occur over the next two to three decades as policies, technology, and
Supplemental Guidance markets shift to a low-carbon energy system.
for the Financial Sector

In addition to GHG emissions, both hydroelectric power generation and cooling for nuclear and non
E.
Supplemental Guidance nuclear power generation use large quantities of water.121 Physical risks affecting water supplies
for Non-Financial Groups creates a potentially important exposure for this industry.

F. Oil, gas, and coal extraction face similar transition risks as key suppliers to electric utilities. These
Fundamental Principles
for Effective Disclosure
industries also rely on water to a significant degree.122, 123, 124

Appendices These characteristics make the Energy Group particularly sensitive to physical, policy, or technological
changes affecting fossil fuel demand, energy production and usage, emissions constraints, and water
availability. The regulatory and competitive landscape that surrounds electric utilities also differs
significantly between jurisdictions, thus making assessment of climate-related risks very challenging.

As a result, both the transition risks and physical risks associated with climate change may impact the
operating costs and asset valuation of organizations engaged in energy activities. In particular,
organizations within the Energy Group are generally capital intensive, require major financial
investments in fixed assets and supply chain management, and have longer business strategy/capital

120
According to International Energy Agency (IEA) data, CO2 emissions from fuel combustion across all energy sectors and activities totaled 33.5
Gigatons (Gt) in 2018, thereby accounting for 65 percent of total anthropogenic GHG emissions (51.9 Gt CO2e). Electricity and heat production
on its own accounted for 14Gt, representing 42 percent of all CO2 emissions from fuel combustion and 27 percent of all anthropogenic GHG
emissions. To put this into context, the next highest emitting industrial sector was transportation, which accounted for 8.3Gt (25 percent of all
CO2 emissions from fuel combustion, and 16 percent of total anthropogenic GHG emissions). IEA, CO2 Emissions from Fuel Combustion:
Highlights, 2020; PBL Netherlands Environmental Assessment Agency, Trends in Global CO2 and Total Greenhouse Gas Emissions: 2020 Report,
2020.
121
van Vilet, M., et al., “Power-generation system vulnerability and adaptation to changes in climate and water resources,” 2016.
122
IPIECA, Water Resource Management in the Petroleum Industry, 2005.
123
International Council on Mining and Metals (ICCM), In Brief: Water stewardship framework, 2014.
124
World Resources Institute (WRI), Water-Energy Nexus: Business Risks and Rewards, Washington, DC, 2016.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 63

 allocation planning horizons relative to many other sectors—horizons that may be particularly affected
by climate-related risks and opportunities. This requires careful assessment of climate-related risks
and opportunities to inform decisions about future sustainability and profitability.

Transparent and decision-useful climate-related disclosures are crucial to fully understand the impact
of climate change on business strategy and financial plans in energy activities. Consequently,
disclosures should focus on qualitative and quantitative assessments and potential impacts of the
following:

▪ changes in compliance and operating costs, risks, or opportunities (e.g., older, less-efficient
facilities or un-exploitable fossil fuel reserves in the ground);

▪ exposure to regulatory changes or changing consumer and investor expectations

(e.g., expansion of renewable energy in the mix of energy supply); and

▪ changes in investment strategies (e.g., opportunities for increased investment in renewable

energy, carbon-capture technologies, and more efficient water usage).

Energy Group organizations should consider providing additional industry-specific metrics.125 Examples
of potential metrics include percent of water withdrawn in regions with high baseline water stress and
amount of gross global Scope 1 emissions from (1) combustion, (2) flared hydrocarbons, (3) process
A.
emissions, (4) directly vented releases, and (5) fugitive emissions/leaks.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

125
For more sector-specific information, see SASB, “Climate Risk Technical Bulletin,” April 12, 2021, WBCSD, “TCFD Oil and Gas Preparer Forum,”
July 18 2018, and WBCSD, “TCFD Electric Utilities Preparer Forum,” July 16, 2019.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 64

 2. Transportation Group
The Transportation Group includes, but is not limited to, industries listed in Figure 10.

Transportation is critical to the economy and

drives a significant portion of emissions and Figure 10
demand for energy through the production and, Transportation Group
more important, the use phase. The industry is
Industry/Sub-Industry
under increasing policy and regulatory pressure
Air Freight
to achieve emissions targets for the use phase.
Increasing constraints on emissions fuel Passenger Air
efficiency will continue to impact costs in this Transportation
Group
group, particularly around investments in Maritime Transportation
innovation (new technologies and efficiencies).126 Transportation
Rail Transportation
The Transportation Group, therefore, will likely
Trucking Services
face financial challenges from two major drivers.
First, policymakers are setting stricter targets for Automobiles
A. emissions and fuel efficiency from transportation
Introduction carriers. Second, new technology around low-
emission/fuel-efficient carriers (e.g., electric cars) is creating a shift in the competitive and investment
B.
landscape. New technological innovations and new market entrants can weaken companies’ market
Recommendations
position, resulting in lower revenues, higher costs, and narrower margins. The effects of these two
C. drivers may be compounded by the length of product cycles for transportation products, such as cars
Guidance for All Sectors and trucks, and especially for air and rail and marine equipment. As with the Energy Group,
investments in long-lived assets (e.g., manufacturing facilities, airplanes, ships) and longer planning
D.
Supplemental Guidance horizons are relevant factors that must be taken into account when considering the climate-related
for the Financial Sector risks and opportunities.

E. Consequently, disclosures should focus on qualitative and quantitative assessments and potential
Supplemental Guidance
impacts of the following:
for Non-Financial Groups

F. ▪ financial risks around current plant and equipment, such as potential early write-offs of
Fundamental Principles equipment and R&D investments or early phasing out of current products due to policy
for Effective Disclosure constraints or shifts or the emergence of new technology;
Appendices ▪ investments in research and development of new technologies and potential shifts in demand
for various types of transportation carriers; and

▪ opportunities to use new technologies to address lower-emissions standards and increased

fuel-efficiency requirements, including transport vehicles (cars, ships, planes, rail) that run on a
range of traditional and alternative fuels.

Transportation Group organizations should consider providing additional industry-specific metrics.127

Examples of potential metrics include sales weighted average fleet fuel economy by region and
weight/number of people transported, Energy Efficiency Design Index (EEDI) for new ships, life cycle
reporting of GHG emissions of transportation products (air, ship, rail, truck, auto).

126
Moody’s Global Credit Research, “Moody’s: Auto sector faces rising credit risks due to carbon transition,” September 20, 2016.
127
For more sector-specific information, see SASB, “Climate Risk Technical Bulletin,” April 12, 2021 and WBCSD, “TCFD Auto Preparer Forum,”
May 26, 2021.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 65

 3. Materials and Buildings Group
The Materials and Buildings Group includes, but is not limited to, industries listed in Figure 11.

Materials and Buildings Group organizations are

typically capital intensive, require high Figure 11
investments in plants, equipment, and buildings Materials and Buildings Group
that are (relatively) fixed in terms of location, and
Industry/Sub-Industry
dependent on sources of raw and refined
materials. This may reduce the flexibility of Metals and Mining
organizations in this group to adapt to risks of
Group Chemicals
climate change.
Materials
Construction Materials
Many of this group’s activities result in financial and Buildings
exposures around high GHG emissions and high Capital Goods
energy consumption. Furthermore, a number of
Real Estate Management
industries in this group are dependent on water
and Development
availability and/or vulnerable to the effects of
A. acute or chronic physical risks from weather
Introduction
events.
B.
Since the group is capital intensive and the plants and facilities have a long life span, accelerated
Recommendations
R&DDD (research, development, demonstration, and deployment) is critically important. Thus,
C. disclosures relating to R&DDD plans and progress are valuable to see the current and future situation
Guidance for All Sectors and risks of organizations in the group.

D.
Consequently, disclosures should focus on qualitative and quantitative assessments and potential
Supplemental Guidance
for the Financial Sector impacts of the following:

E. ▪ Stricter constraints on emissions and/or pricing carbon emissions and related impact on costs.
Supplemental Guidance
for Non-Financial Groups ▪ The construction materials and real estate sectors should assess risks related to the increasing
frequency and severity of acute weather events or increasing water scarcity that impact their
F. operating environment.
Fundamental Principles
for Effective Disclosure ▪ Opportunities for products (or services) that improve efficiency, reduce energy use, and
support closed-loop product solutions.
Appendices
Materials and Buildings Group organizations should consider providing additional industry-specific
metrics.128 Examples of potential metrics include building energy intensity by area, building water
intensity (by occupants or square area), percent of fresh water withdrawn in regions with high or
extremely high baseline water stress, and area of buildings, plants, or properties located in designated
flood hazard areas.

128
For more sector-specific information, see SASB, “Climate Risk Technical Bulletin,” April 12, 2021 and WBCSD, “Construction and Building
Materials TCFD Preparer Forum,” July 1, 2020.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 66

 4. Agriculture, Food, and Forest Products Group
The Agriculture, Food, and Forest Products Group includes, but is not limited to, industries listed in
Figure 12.

Climate-related risks and opportunities in

this group largely emanate from GHG Figure 12
emissions and water and waste Agriculture, Food, and Forest
management driven by land use, production
Products Group
practices, and changing land-use patterns.129
Industry/Sub-Industry

The absolute and relative impacts of Beverages

climate-related transition and physical risks Group
will vary between producers and processors Agriculture
Agriculture, Food,
of food and fiber. and Forest Products
Packaged Foods and Meats

Producers, such as agriculture and forestry Paper and Forest Products

enterprises, will likely be impacted
financially to a somewhat greater degree by GHG and water risks (including extreme weather events
A.
Introduction and shifts in precipitation patterns) than processors. Agriculture and forest producers generate
significant non-point GHG emissions, primarily through land-use practices and changes to them
B. (e.g., grazing, soil tillage practices, conservation practices, feedlot practices, deforestation, or
Recommendations
afforestation).130
C.
Guidance for All Sectors
Processors, such as food, beverage, and fiber processors (e.g., paper), will likely be impacted relatively
less by direct GHG emissions (Scope 1), but more by indirect GHG emissions (Scope 3) arising from
D. their supply and distribution chains. Processors will also have a similar emphasis on water and waste
Supplemental Guidance risks and opportunities as compared with producers. Beverage production and paper production, for
for the Financial Sector
example, depend on access to significant water resources and, in the case of beverage production,
E. high-quality water resources. Risks and opportunities around waste include residual materials such as
Supplemental Guidance paper and wood waste, wastewater, and post-processing animal byproducts.
for Non-Financial Groups

Assessing the impacts of climate-related risks and opportunities for the Agriculture, Food, and Forest
F.
Fundamental Principles
Products Group involves a number of interactions and trade-offs among the climate-related aspects of
for Effective Disclosure land use, water, waste, carbon sequestration, biodiversity, and conservation, complicated by short-run
competing goals around food security (e.g., maintaining production sufficient to meet the rising
Appendices
demand for food, fiber, fodder, and biofuels).

Policies and regulations around land use and conservation requirements, for example, may constrain
or preclude certain uses of land and water resources (e.g., deforestation, riparian rights, tillable land).
Such policies may lead to significant asset impairment if forest or agricultural lands cannot be used to
produce food or fiber.

Opportunities in the Agriculture, Food, and Forest Products Group largely fall into three categories:

▪ Increasing efficiency by lowering the level of carbon and water intensity per unit of output
(e.g., through drought-resistant hybrids, nutrient-efficient genetically modified organisms
(GMOs), feed and feed practices that reduce livestock methane emissions).

129
According to the Intergovernmental Panel on Climate Change (IPCC), agriculture and forestry is responsible for “just under a quarter of
anthropogenic GHG emissions mainly from deforestation and agricultural emissions from livestock, soil, and nutrient management.
Anthropogenic forest degradation and biomass burning (forest fires and agricultural burning) also represent relevant contributions.” (IPCC.
“Agriculture, Forestry and Other Land Use (AFOLU),” In: Climate Change 2014: Mitigation of Climate Change, 2014. Contribution of Working
Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change). Agriculture is also a heavy user of water,
primarily for irrigation.
130
For more information, see definitions of land use change and indirect land use change on page 1,265 of the IPCC’s Climate Change 2014:
Mitigation of Climate Change.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 67

 ▪ Reducing inputs and residual waste for a given level of output (e.g., nutrient management
practices, tillage practices, conservation practices, biofuels, food waste reduction).

▪ Developing new products and services with lower carbon and water intensity (e.g., bioplastics).

Disclosures, therefore, should focus on qualitative and quantitative information related to both the
group’s policy and market risks in the areas of GHG emissions and water, and its opportunities around
carbon sequestration, increasing food and fiber production, and reducing waste, including:

▪ Efforts to reduce GHG emissions and water intensity, including such non-point GHG sources as
crop nutrient processes, livestock management processes, erosion, tillage practices, watershed
practices, and forest management.

▪ Efforts to improve sustainability through better recycling of outputs and residual waste
(e.g., wood products, food waste, and animal byproducts).

▪ Climate-related impacts on food and fiber production (e.g., extreme weather or water events).
▪ Opportunities that capture shifts in business and consumer trends toward food and fiber
products, processes and services that produce lower emissions and are less water-/waste-
intensive while maintaining adequate food security (e.g., bioplastics, GMOs, new uses for
A.
Introduction wood/animal byproducts).

Agriculture, Food, and Forest Product Group organizations should consider providing additional
B.
Recommendations industry-specific metrics.131 Examples of potential metrics include total water withdrawn and total
water consumed, percent of water withdrawn and consumed in regions with high or extremely high
C. baseline water stress, emissions from biological processes, changes in carbon stocks as a result of land
Guidance for All Sectors
use, and land use changes.
D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

131
For more sector-specific information, see SASB, “Climate Risk Technical Bulletin,” April 12, 2021 and WBCSD, “Food, Agriculture and Forest
Products TCFD Preparer Forum,” April 9, 2020.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 68

 F.
Fundamental
Principles
for Effective
Disclosure
A.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 69

 F. Fundamental Principles for Effective Disclosure
To underpin its recommendations and help guide current and future developments in climate-related
financial reporting, the Task Force developed a set of principles for effective disclosure.132 As
understanding of, and approaches to, climate-related issues evolve over time, so too will climate-
related financial reporting. These principles can help achieve high-quality and decision-useful
disclosures that enable users to understand the impact of climate change on organizations. The Task
Force encourages organizations adopting its recommendations to consider these principles as they
develop climate-related financial disclosures.

The Task Force’s disclosure principles are largely consistent with other mainstream, internationally
accepted frameworks for financial reporting and are generally applicable to most providers of financial
disclosures. They are informed by the qualitative and quantitative characteristics of financial
information and further the overall goals of producing disclosures that are consistent, comparable,
reliable, clear, and efficient, as highlighted by the FSB in establishing the Task Force. The principles,
taken together, are designed to assist organizations in making clear the linkages and connections
between climate-related issues and their governance, strategy, risk management, and metrics and
targets.
A.
Introduction Principle 1: Disclosures should present relevant information
The organization should provide information specific to the potential impact of climate-related risks
B. and opportunities on its markets, businesses, corporate or investment strategy, financial statements,
Recommendations
and future cash flows.
C.
Guidance for All Sectors
▪ Disclosures should be eliminated if they are immaterial or redundant to avoid obscuring
relevant information. However, when a particular risk or issue attracts investor and market
D. interest or attention, it may be helpful for the organization to include a statement that the risk
Supplemental Guidance or issue is not significant. This shows that the risk or issue has been considered and has not
for the Financial Sector
been overlooked.
E.
▪ Disclosures should be presented in sufficient detail to enable users to assess the organization’s
Supplemental Guidance
for Non-Financial Groups exposure and approach to addressing climate-related issues, while understanding that the type
of information, the way in which it is presented, and the accompanying notes will differ
F. between organizations and will be subject to change over time.
Fundamental Principles
for Effective Disclosure ▪ Climate-related impacts can occur over the short, medium, and long term. Organizations can
experience chronic, gradual impacts (such as impacts due to shifting temperature patterns), as
Appendices
well as acute, abrupt disruptive impacts (such as impacts from flooding, drought, or sudden
regulatory actions). An organization should provide information from the perspective of the
potential impact of climate-related issues on value creation, taking into account and addressing
the different time frames and types of impacts.

▪ Organizations should avoid generic or boilerplate disclosures that do not add value to users’
understanding of issues. Furthermore, any proposed metrics should adequately describe or
serve as a proxy for risk or performance and reflect how an organization manages the risk and
opportunities.

Principle 2: Disclosures should be specific and complete

▪ An organization’s reporting should provide a thorough overview of its exposure to potential

climate-related impacts; the potential nature and size of such impacts; the organization’s
governance, strategy, processes for managing climate-related risks, and performance with
respect to managing climate-related risks and opportunities.

132
These principles are adapted from those included in the Enhanced Disclosure Task Force’s “Enhancing the Risk Disclosures of Banks.”

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 70

 ▪ To be sufficiently comprehensive, disclosures should contain historical and future-oriented
information in order to allow users to evaluate their previous expectations relative to actual
performance and assess possible future financial implications.

▪ For quantitative information, the disclosure should include an explanation of the definition and
scope applied. For future-oriented data, this includes clarification of the key assumptions used.
Forward-looking quantitative disclosure should align with data used by the organization for
investment decision-making and risk management.

▪ Any scenario analyses should be based on data or other information used by the organization
for investment decision-making and risk management. Where appropriate, the organization
should also demonstrate the effect on selected risk metrics or exposures to changes in the key
underlying methodologies and assumptions, both in qualitative and quantitative terms.

Principle 3: Disclosures should be clear, balanced, and understandable

▪ Disclosures should be written with the objective of communicating financial information that
serves the needs of a range of financial sector users (e.g., investors, lenders, insurers, analysts).
This requires reporting at a level beyond compliance with minimum requirements. The
disclosures should be sufficiently granular to inform sophisticated users, but should also
A.
Introduction
provide concise information for those who are less specialized. Clear communication will allow
users to identify key information efficiently.
B.
Recommendations
▪ Disclosures should show an appropriate balance between qualitative and quantitative
information and use text, numbers, and graphical presentations as appropriate.
C.
Guidance for All Sectors ▪ Fair and balanced narrative explanations should provide insight into the meaning of
quantitative disclosures, including the changes or developments they portray over time.
D. Furthermore, balanced narrative explanations require that risks as well as opportunities be
Supplemental Guidance
portrayed in a manner that is free from bias.
for the Financial Sector
▪ Disclosures should provide straightforward explanations of issues. Terms used in the
E.
disclosures should be explained or defined for a proper understanding by the users.
Supplemental Guidance
for Non-Financial Groups
Principle 4: Disclosures should be consistent over time
F.
Fundamental Principles ▪ Disclosures should be consistent over time to enable users to understand the development
for Effective Disclosure and/or evolution of the impact of climate-related issues on the organization’s business.
Disclosures should be presented using consistent formats, language, and metrics from period
Appendices
to period to allow for inter-period comparisons. Presenting comparative information is
preferred; however, in some situations it may be preferable to include a new disclosure even if
comparative information cannot be prepared or restated.

▪ Changes in disclosures and related approaches or formats (e.g., due to shifting climate-related
issues and evolution of risk practices, governance, measurement methodologies, or accounting
practices) can be expected due to the relative immaturity of climate-related disclosures. Any
such changes should be explained.

Principle 5: Disclosures should be comparable among organizations within a sector, industry,

or portfolio

▪ Disclosures should allow for meaningful comparisons of strategy, business activities, risks, and
performance across organizations and within sectors and jurisdictions.

▪ The level of detail provided in disclosures should enable comparison and benchmarking of
risks across sectors and at the portfolio level, where appropriate.

▪ The placement of reporting would ideally be consistent across organizations—i.e., in financial

filings—in order to facilitate easy access to the relevant information.

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 71

 Principle 6: Disclosures should be reliable, verifiable, and objective

▪ Disclosures should provide high-quality reliable information. They should be accurate and
neutral—i.e., free from bias.

▪ Future-oriented disclosures will inherently involve the organization’s judgment (which should
be adequately explained). To the extent possible, disclosures should be based on objective
data and use best-in-class measurement methodologies, which would include common
industry practice as it evolves.

▪ Disclosures should be defined, collected, recorded, and analyzed in such a way that the
information reported is verifiable to ensure it is high quality. For future-oriented information,
this means assumptions used can be traced back to their sources. This does not imply a
requirement for independent external assurance; however, disclosures should be subject to
internal governance processes that are the same or substantially similar to those used for
financial reporting.

Principle 7: Disclosures should be provided on a timely basis

▪ Information should be delivered to users or updated in a timely manner using appropriate

A. media on, at least, an annual basis within the mainstream financial report.
Introduction
▪ Climate-related risks can result in disruptive events. In case of such events with a material
B. financial impact, the organization should provide a timely update of climate-related disclosures
Recommendations as appropriate.

C. Reporters may encounter tension in the application of the fundamental principles set out above. For
Guidance for All Sectors example, an organization may update a methodology to meet the comparability principle, which could
then result in a conflict with the principle of consistency. Tension can also arise within a single
D.
Supplemental Guidance principle. For example, Principle 6 states that disclosures should be verifiable, but assumptions made
for the Financial Sector about future-oriented disclosures often require significant judgment by management that is difficult to
verify. Such tensions are inevitable given the wide-ranging and sometimes competing needs of users
E.
and preparers of disclosures. Organizations should aim to find an appropriate balance of disclosures
Supplemental Guidance
for Non-Financial Groups that reasonably satisfy the recommendations and principles while avoiding overwhelming users with
unnecessary information.
F.
Fundamental Principles
for Effective Disclosure

Appendices

Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures 72

 Appendices

A.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

Appendices 73
 Appendix 1: Climate-Related Risks, Opportunities, and
Financial Impacts
The central objective of the Task Force’s recommendations is to encourage organizations to evaluate
and disclose, as part of their financial filing preparation and reporting processes, the material climate-
related risks and opportunities that are most pertinent to their business activities.

The Task Force divided climate-related risks into two major categories: (1) risks related to the transition
to a low-carbon economy and (2) risks related to the physical impacts of climate change. The Task
Force identified certain subcategories under each of these categories.

Transition Risks Physical Risks

− Policy and Legal − Acute
− Technology − Chronic
− Market
− Reputation

A.
Introduction
The Task Force divided climate-related opportunities into five major categories related to resource
efficiency and cost savings, the adoption of low-emission energy sources, the development of new
B. products and services, access to new markets, and building resilience along the supply chain.
Recommendations
Opportunities
C.
Guidance for All Sectors − Resource Efficiency − Markets
− Energy Source − Resilience
D.
− Products and Services
Supplemental Guidance
for the Financial Sector
Tables A1.1 and A1.2 (pp. 75–76) provide examples and potential financial impacts related to the
E.
specific categories of climate-related risks and opportunities the Task Force identified. Please note that
Supplemental Guidance
for Non-Financial Groups the sub-category risks and examples described under each major category are not mutually exclusive,
and some overlap exists.
F.
Fundamental Principles Table A1.3 (p. 77) provides additional examples of how organizations could be affected by climate-
for Effective Disclosure
related financial impacts.
Appendices

Appendices 74
 Table A1.1
Examples of Climate-Related Risks and Potential Financial Impacts
Type Climate-Related Risks133 Potential Financial Impacts
Policy and Legal

‒ Increased pricing of GHG emissions ‒ Increased operating costs (e.g., higher compliance costs,
‒ Enhanced emissions-reporting increased insurance premiums)
obligations ‒ Write-offs, asset impairment, and early retirement of
‒ Mandates on and regulation of existing assets due to policy changes
existing products and services ‒ Increased costs and/or reduced demand for products
‒ Exposure to litigation and services resulting from fines and judgments
Technology

‒ Substitution of existing products and ‒ Write-offs and early retirement of existing assets
services with lower emissions ‒ Reduced demand for products and services
options
‒ Research and development (R&D) expenditures in new
‒ Unsuccessful investment in new and alternative technologies
technologies
‒ Capital investments in technology development
‒ Costs to transition to lower
‒ Costs to adopt/deploy new practices and processes
emissions technology
Transition Risks

A. Market
Introduction
‒ Changing customer behavior ‒ Reduced demand for goods and services due to shift in
B. ‒ Uncertainty in market signals consumer preferences
Recommendations ‒ Increased cost of raw materials ‒ Increased production costs due to changing input prices
(e.g., energy, water) and output requirements
C.
(e.g., waste treatment)
Guidance for All Sectors
‒ Abrupt and unexpected shifts in energy costs
D. ‒ Change in revenue mix and sources, resulting in
Supplemental Guidance decreased revenues
for the Financial Sector ‒ Re-pricing of assets (e.g., fossil fuel reserves, land
valuations, securities valuations)
E.
Reputation
Supplemental Guidance
for Non-Financial Groups ‒ Shifts in consumer preferences ‒ Reduced revenue from decreased demand for
‒ Stigmatization of sector goods/services
F.
‒ Increased stakeholder concern or ‒ Reduced revenue from decreased production capacity
Fundamental Principles
negative stakeholder feedback (e.g., delayed planning approvals, supply chain
for Effective Disclosure
interruptions)
Appendices ‒ Reduced revenue from negative impacts on workforce
management and planning (e.g., employee attraction
and retention)
‒ Reduction in capital availability
Acute ‒ Reduced revenue from decreased production capacity
(e.g., transport difficulties, supply chain interruptions)
‒ Increased severity of extreme
weather events such as cyclones and ‒ Reduced revenue and higher costs from negative
floods impacts on workforce (e.g., health, safety, absenteeism)
‒ Write-offs and early retirement of existing assets
Physical Risks

Chronic (e.g., damage to property and assets in “high-risk”

locations)
‒ Changes in precipitation patterns
and extreme variability in weather
‒ Increased operating costs (e.g., inadequate water supply
for hydroelectric plants or to cool nuclear and fossil fuel
patterns
plants)
‒ Rising mean temperatures
‒ Rising sea levels ‒ Increased capital costs (e.g., damage to facilities)
‒ Reduced revenues from lower sales/output
‒ Increased insurance premiums and potential for
reduced availability of insurance on assets in “high-risk”
locations

133
The sub-category risks described under each major category are not mutually exclusive, and some overlap exists.

Appendices 75
 Table A1.2
Examples of Climate-Related Opportunities and Potential Financial Impacts
Type Climate-Related Opportunities134 Potential Financial Impacts

‒ Use of more efficient modes of ‒ Reduced operating costs (e.g., through efficiency gains

Resource Efficiency
transport and cost reductions)
‒ Use of more efficient production ‒ Increased production capacity, resulting in increased
and distribution processes revenues
‒ Use of recycling ‒ Increased value of fixed assets (e.g., highly rated energy-
‒ Move to more efficient buildings efficient buildings)

‒ Reduced water usage and ‒ Benefits to workforce management and planning

consumption (e.g., improved health and safety, employee satisfaction)
resulting in lower costs

‒ Use of lower-emission sources of ‒ Reduced operational costs (e.g., through use of lowest
energy cost abatement)
‒ Use of supportive policy incentives ‒ Reduced exposure to future fossil fuel price increases
Energy Source

‒ Use of new technologies ‒ Reduced exposure to GHG emissions and therefore less
‒ Participation in carbon market sensitivity to changes in cost of carbon

A. ‒ Shift toward decentralized energy ‒ Returns on investment in low-emission technology

Introduction generation ‒ Increased capital availability (e.g., as more investors favor
lower-emissions producers)
B.
‒ Reputational benefits resulting in increased demand for
Recommendations
goods/services

C. ‒ Development and/or expansion of ‒ Increased revenue through demand for lower emissions
Products and Services

Guidance for All Sectors low emission goods and services products and services
‒ Development of climate adaptation ‒ Increased revenue through new solutions to adaptation
D.
and insurance risk solutions needs (e.g., insurance risk transfer products and services)
Supplemental Guidance
for the Financial Sector ‒ Development of new products or ‒ Better competitive position to reflect shifting consumer
services through R&D and preferences, resulting in increased revenues
E. innovation
Supplemental Guidance ‒ Ability to diversify business activities
for Non-Financial Groups
‒ Shift in consumer preferences
F. ‒ Access to new markets ‒ Increased revenues through access to new and emerging
Fundamental Principles
Markets

‒ Use of public-sector incentives markets (e.g., partnerships with governments,

for Effective Disclosure
development banks)
‒ Access to new assets and locations
Appendices needing insurance coverage ‒ Increased diversification of financial assets (e.g., green
bonds and infrastructure)

‒ Participation in renewable energy ‒ Increased market valuation through resilience planning

programs and adoption of energy- (e.g., infrastructure, land, buildings)
Resilience

efficiency measures ‒ Increased reliability of supply chain and ability to operate

‒ Resource substitutes/diversification under various conditions
‒ Increased revenue through new products and services
related to ensuring resiliency

134
The opportunity categories are not mutually exclusive, and some overlap exists.

Appendices 76
Table A1.3
Examples of Potential Climate-Related Impacts by Financial Category
Category and
Climate-Related Implications135 Examples of Potential Impacts Rationale and Illustrative Metrics
Definition
Revenue Changing market demand for product - Revenue from operational disruption Drivers of climate change, such as water usage, emissions, and land use,
Income from and services due to climate-related risks/ +/- Revenue from changing sales of are expected to be the focus of regulations (e.g., standards, emission
normal business opportunities, such as a shift in customer products/services limits, carbon prices), technology development, and market changes.
activities, usually preferences. These policy, market, and technology changes may result in a significant
Sensitivity of existing revenue streams, shift in an organization’s future earning capacity depending on the
from the sale of
products, and services to constraints on, emissions, energy, and water intensity of its products and services
goods and
or perceptions of, carbon intensity, relative to constraints and demands.
services
emissions, water intensity, land use. Example Metrics:
Development of new revenue streams, • Percentage of revenue by product or service line
products, and services in response to • Energy, emissions, water intensity of each product or service line
climate-related opportunities.

Expenditures: Required or discretionary increases in + R&D in new technology, products, Drivers of climate change, such as water usage, emissions, and land use,
OpEx operating expenditures to address services are expected to be the focus of regulations (e.g., standards, emission
Ongoing cost of climate-related risk mitigation, +/- Purchased energy and water and limits, carbon prices), technology development, and market changes.
running a adaptation, regulatory requirements, or other costs of supply/materials These policy, market, and technology changes may result in a significant
cost of supply/materials. shift in an organization’s cost of supply and operating expenses
company + Increased production costs due to
Decreases in expenses as a result of depending on the emissions, energy, and water intensity and land use of
changing output requirements
increased energy or water efficiency in an organization in its business activities.
(e.g., waste treatment, emissions
response to climate-related risks. controls) Example Metric: Percentage of R&D expenditures for low-carbon
alternatives and energy/water efficiencies
+ Costs to improve energy or water
conservation and efficiency capabilities
+ Expenses to address physical risks
(e.g., insurance premiums, recovery
expenses)
Assets: CapEx Required or discretionary increases in + CapEx in equipment or new Drivers of climate change, such as water usage, emissions, and land use,
An expense where capital expenditures to address climate- technologies to manage transition risk, are expected to be the focus of regulations (e.g., standards, emission
the benefit related risk mitigation, adaptation, or adaptation, and conservation/efficiency limits, carbon prices), technology development, and market changes.
continues over a regulatory requirements. efforts These policy, market, and technology changes may result in a significant
+ CapEx for physical risk mitigation shift in an organization’s planned capital expenditures, including
long period; non-
(e.g., facilities location/hardening, acquisition or disposal of assets, investments in land and facilities,
recurring nature;
resiliency capabilities) acquisition of new technology, and other shifts, depending on how the
results in organization responds to identified climate-related issues.
acquisition of +/- Investment hurdles affected by
internal and external carbon prices Example Metrics:
permanent assets
• Percentage of CapEx allocated to low-carbon/renewable assets,
deployment of low-carbon technology, efficiency of facilities
• Internal/external carbon price and discount rate used to establish
investment hurdle rates

135
The information contained in this table is not intended to reflect accounting treatments, but rather seeks to lay out a general understanding of how climate-related risks might affect general financial
categories. Importantly, there are a number of relationships among some of the financial implications illustrated in the table. For example, legal liabilities for climate change (a contingent liability) may be
realized as an expense if a judgment is rendered. Similarly, expenses on mitigation and adaptation efforts may result in future cost savings (expense reductions).

Appendices 77
Table A1.3
Examples of Potential Climate-Related Impacts by Financial Category (continued)
Category and
Climate-Related Implications56 Examples of Potential Impacts Impacts Rationale and Illustrative Metrics
Definition
Assets: Tangible Changes in the value of an organization’s +/- Value of assets based on emissions, Climate change, especially the transition to a low-carbon economy, may
Land, equipment, assets, or the acquisition or sale of energy or water intensity; carbon price; affect the value of an organization’s assets (either positively or
facilities, reserves, assets, as a result of climate-related risks demand negatively) depending on how the organization is positioned regarding
cash, etc. and opportunities. - Write-offs/early retirement of existing emissions, energy, water, and land use.
assets due to high emissions, energy, or Example Metrics:
water intensity • Value, and percent by value, of assets located in coastal or flood
- Physical damage or impairment of assets zones
due to weather events and other acute or • Breakdown of assets by associated current or potential future
chronic physical climate effects emissions (MT CO2e), water intensity, or energy intensity
Assets: Changes in an organization’s reputation +/- Brand value How an organization plans and invests in a transition to a low-carbon
Intangible as a result of perceptions about its +/- Value of copyrights economy may positively or negatively affect perceptions about the
Brand, copyrights, management of climate-related risks and organization and its reputation, which in turn may affect its future
- Reduction or disruption in production
goodwill opportunities. earning capacity, market valuation, employee relationships, and
capacity (e.g., shutdowns, delayed planning
relationships with regulators and customers. Climate-related risks and
approvals, interruptions to supply chain)
opportunities also may positively or negatively affect the value of
- Impacts on workforce management technology patents or copyrights.
(e.g., employee attraction and retention)
Liabilities The potential for liability or civil/criminal + Legal liability for climate-related risks As laws, regulations, and case law related to an organization’s
Contingent penalties for the organization’s climate- + Compliance penalties preparedness for climate change evolves, the incident or probability of
liabilities136 related activities. contingent liabilities arising for an organization may increase.
Example Metric: Amount reserved for pending legal actions
Liabilities Changes in cost and level of current Drivers of climate changes, such as water usage, emissions, and land
Current liabilities liabilities as a result of climate-related use, are expected to be the focus of regulations (e.g., standards,
(<= 1 year) risks and opportunities. emission limits, carbon prices), technology development, and market
changes. These policy, market and technology changes may result in a
Changes in cost and level of long-term +/- Amount of debt significant shift in an organization’s revenues, cost of
Financing
debt as a result of climate-related risks supply/materials/production, and capital expenses. An organization’s
Long-term debt +/- Amount of equity capital
and opportunities. demonstrated ability to manage these changes (positively or poorly)
liabilities (> 1 year) +/- Credit rating may affect:
Financing Changes in the cost and level of equity +/- Stock price
• Access to capital and debt markets
Equity capital capital as a result of climate-related risks +/- Debt interest rates
and opportunities. • Equity price and risk premium on debt
• Creditworthiness
• Exposure to divestment risk
• Ability/flexibility in responding to climate-related risks and
opportunities by being able to competitively tap financing markets

136
Contingent liabilities are liabilities that may be incurred depending on the outcome of an uncertain future event. Likelihood of loss is often described as probable, reasonably possible, or remote; ability to
estimate loss is described as known, reasonably estimable, or not reasonably estimable.

Appendices 78
 Appendix 2: Cross-Industry, Climate-Related Metric
Categories
As part of the Task Force’s work to monitor and promote organizations’ adoption of its
recommendations, it has periodically published guidance to support preparers in their implementation
efforts (see Section A.5. Summary of Additional Supporting Materials). In October 2021, the Task Force
published Guidance on Metrics, Targets, and Transition Plans, which includes seven metric categories
(Table A2.1) the Task Force believes are generally applicable to all organizations.137 Importantly, the
seven metric categories are not additions to the Metrics and Targets recommendation as they relate to
metrics that have been part of the Task Force’s guidance for all sectors since the release of its 2017
report.

The Task Force is highlighting these specific metric categories because they are important proxies for
measuring climate-related risks and opportunities, form the basis for estimating climate-related
financial impact, and are important inputs into investment, lending, and insurance underwriting
decisions. While these metric categories are relevant across organizations, they may be
operationalized differently to reflect industry-specific risks and opportunities. More information
regarding the cross-industry, climate-related metric categories can be found in the Guidance on Metrics,
Targets, and Transition Plans.
A.
Introduction
While some organizations already disclose metrics consistent with the cross-industry, climate-related
B. metric categories, the Task Force recognizes others—especially those in the early stages of disclosing
Recommendations climate-related financial information—may need time to adjust internal processes before disclosing
such information. In addition, some of the metric categories may be less applicable to certain
C.
organizations. For example, data and methodologies for certain metrics for asset owners (e.g., impact
Guidance for All Sectors
of climate change on investment income) are in early stages of development. In such cases, the Task
D. Force recognizes organizations will need time before such metrics are disclosed to their stakeholders.
Supplemental Guidance
for the Financial Sector Table A2.1

E.
Cross-Industry, Climate-Related Metric Categories
Supplemental Guidance
for Non-Financial Groups Example Unit
Metric Category of Measure138 Rationale for Inclusion
F.
Fundamental Principles
GHG Emissions MT of CO2e Disclosure of GHG emissions is crucial for users to understand
for Effective Disclosure Absolute Scope 1, an organization’s exposure to climate-related risks and
Scope 2, and opportunities. Disclosure of both absolute emissions across an
Appendices Scope 3; emissions organization’s value chain and relevant emissions intensity
intensity139 provides insight into how a given organization may be affected
by policy, regulatory, market, and technology responses to limit
climate change.

Transition Risks Amount or Disclosure of the amount and extent of an organization’s assets
Amount and extent percentage or business activities vulnerable to climate-related transition
of assets or business risks allows users to better understand potential financial
activities vulnerable exposure regarding such issues as possible impairment or
to transition risks* stranding of assets, effects on the value of assets and liabilities,
and changes in demand for products or services.

137
TCFD, Guidance on Metrics, Targets, and Transition Plans, October 14, 2021.
138
The Task Force has noted the most common unit of measure. There are multiple ways to measure and disclose metrics, and different
jurisdictions or industries may follow different practices. Allowing for differences in units of measure can help provide organizations with
flexibility without significantly impacting comparability as long as units are clearly stated.
139
The Task Force believes Scope 3 GHG emissions are an important metric reflecting an organization’s exposure to climate-related risks and
opportunities and recognizes the data and methodological challenges associated with calculating such emissions. The Task Force encourages
organizations to refer to the GHG Protocol’s The Corporate Value Chain (Scope 3) Accounting and Reporting Standard for guidance on reporting
these emissions.

Appendices 79
 Table A2.1

Cross-Industry, Climate-Related Metric Categories (continued)

Example Unit
Metric Category of Measure140 Rationale for Inclusion
Physical Risks Amount or Disclosure of the amount or extent of an organization’s assets or
Amount and extent percentage business activities vulnerable to material climate-related
of assets or business physical risks allows users to better understand potential
activities vulnerable financial exposure regarding such issues as impairment or
to physical risks* stranding of assets, effects on the value of assets and liabilities,
and cost of business interruptions.

Climate-Related Amount or Disclosure of the proportion of revenue, assets, or business

Opportunities percentage activities aligned with climate-related opportunities provides
Proportion of insight into the position of organizations relative to their peers
revenue, assets, or and allows users to understand likely transition pathways and
other business potential changes in revenue and profitability over time.
activities aligned
with climate-related
opportunities

Capital Deployment Reporting Capital investment disclosure by non-financial organizations and

A. Amount of capital currency financing by financial organizations gives an indication of the
Introduction expenditure, extent to which long-term enterprise value might be affected.
financing, or
B. investment deployed
Recommendations
toward climate-
related risks and
C.
opportunities
Guidance for All Sectors
Internal Carbon Price in reporting Internal carbon prices provide users with an understanding of
D. Prices currency, per MT the reasonableness of an organization’s risk and opportunity
Supplemental Guidance Price on each ton of of CO2e assessment and strategy resilience. The disclosure of internal
for the Financial Sector GHG emissions used carbon prices can help users identify which organizations have
internally by an business models that are vulnerable to future policy responses
E.
organization to climate change and which are adapting their business models
Supplemental Guidance
to ensure resilience to transition risks.
for Non-Financial Groups
Remuneration Percentage, Remuneration policies are important incentives for achieving an
F. Proportion of weighting, organization’s goals and objectives and may provide insight on
Fundamental Principles executive description, or an organization’s governance, oversight, and accountability for
for Effective Disclosure management amount in managing climate-related issues.
remuneration linked reporting
Appendices
to climate currency
considerations**

140
The Task Force has noted the most common unit of measure. There are multiple ways to measure and disclose metrics, and different
jurisdictions or industries may follow different practices. Allowing for differences in units of measure can help provide organizations with
flexibility without significantly impacting comparability as long as units are clearly stated.

Appendices 80
 Table A2.1

Cross-Industry, Climate-Related Metric Categories (continued)

Example Unit
Metric Category of Measure140 Rationale for Inclusion
Note: While some organizations already disclose metrics consistent with these categories, the Task Force
recognizes others—especially those in the early stages of disclosing climate-related financial information—may
need time to adjust internal processes before disclosing such information.141 In addition, some of the metric
categories may be less applicable to certain organizations. For example, data and methodologies for certain
metrics for asset owners (e.g., impact of climate change on investment income) are in early stages of
development. In such cases, the Task Force recognizes organizations will need time before such metrics are
disclosed to their stakeholders.

On the application of materiality, the Task Force believes all organizations should disclose absolute Scope 1 and
Scope 2 GHG emissions independent of a materiality assessment. The disclosure of Scope 3 GHG emissions is
subject to materiality; however, the Task Force encourages organizations to disclose such emissions. The other
cross-industry, climate-related metric categories remain subject to materiality. Organizations should determine
materiality for climate-related metrics consistent with how they determine the materiality of other information
included in their financial filings.

*Transition and Physical Risks: Due to challenges related to portfolio aggregation and sourcing data from
companies or third-party fund managers, financial organizations may find it more difficult to quantify exposure
A. to climate-related risks. The Task Force suggests that financial organizations provide qualitative and quantitative
Introduction information, when available.

**Remuneration: While the Task Force encourages quantitative disclosure, organizations may include
B.
descriptive language on remuneration policies and practices, such as how climate change issues are included in
Recommendations
balanced scorecards for executive remuneration.
C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

141
Organizations may need time to evaluate and determine which metrics are relevant to disclose, identify and collect data and other
information needed for the calculation of metrics, implement new or update existing processes to address or include relevant metrics, etc.
The Task Force recognizes the amount of time needed to disclose certain metrics (e.g., physical risks) consistent with the categories identified
in Table A2.1.

Appendices 81
 Appendix 3: Glossary and Abbreviations
Glossary
BOARD OF DIRECTORS (or BOARD) refers to a body of elected or appointed members who jointly
oversee the activities of a company or organization. Some countries use a two-tiered system where
“board” refers to the “supervisory board” while “key executives” refers to the “management board.”142

CARBON FOOTPRINTING refers to the calculation of the total greenhouse gas emissions caused by an
individual, event, organization, service, or product expressed as a carbon dioxide equivalent.

CLIMATE-RELATED OPPORTUNITY refers to the potential positive impacts related to climate change
on an organization. Efforts to mitigate and adapt to climate change can produce opportunities for
organizations, such as through resource efficiency and cost savings, the adoption and utilization of
low-emission energy sources, the development of new products and services, and building resilience
along the supply chain. Climate-related opportunities will vary depending on the region, market, and
industry in which an organization operates.

CLIMATE-RELATED RISK refers to the potential negative impacts of climate change on an organization.
A. Physical risks emanating from climate change can be event-driven (acute) such as increased severity of
Introduction extreme weather events (e.g., cyclones, droughts, floods, and fires). They can also relate to longer-term
shifts (chronic) in precipitation and temperature and increased variability in weather patterns (e.g., sea
B.
level rise). Climate-related risks can also be associated with the transition to a lower-carbon global
Recommendations
economy, the most common of which relate to policy and legal actions, technology changes, market
C. responses, and reputational considerations.
Guidance for All Sectors
ENTERPRISE VALUE INCLUDING CASH refers to the sum of the market capitalization of ordinary shares
D. at fiscal year-end, the market capitalization of preferred shares at fiscal year-end, and the book values
Supplemental Guidance
for the Financial Sector
of total debt and minorities’ interests. No deductions of cash or cash equivalents are made to avoid the
possibility of negative enterprise values143
E.
Supplemental Guidance FINANCIAL FILINGS refer to the annual reporting packages in which organizations are required to
for Non-Financial Groups
deliver their audited financial results under the corporate, compliance, or securities laws of the
F.
jurisdictions in which they operate. While reporting requirements differ internationally, financial filings
Fundamental Principles generally contain financial statements and other information such as governance statements and
for Effective Disclosure management commentary.144

Appendices
FINANCIAL PERFORMANCE refers to an organization’s income and expenses as reflected on its income
and cashflow statements (actual) or potential income and expenses under different climate-related
scenarios.

FINANCIAL PLANNING refers to an organization’s consideration of how it will achieve and fund its
objectives and strategic goals. The process of financial planning allows organizations to assess future
financial positions and determine how resources can be utilized in pursuit of short- and long-term
objectives. As part of financial planning, organizations often create “financial plans” that outline the
specific actions, assets, and resources (including capital) necessary to achieve these objectives over a
1–5 year period. However, financial planning is broader than the development of a financial plan as it
includes long-term capital allocation and other considerations that may extend beyond the typical
3–5 year financial plan (e.g., investment, research and development, manufacturing, and markets).

142
OECD, G20/OECD Principles of Corporate Governance, 2015.
143
EU Technical Expert Group on Sustainable Finance, Financing a Sustainable European Economy: Report on Benchmarks: Handbook of Climate
Transition Benchmarks, Paris Aligned Benchmark, and Benchmarks’ ESG Disclosure, 2019.
144
Based on Climate Disclosure Standards Board, CDSB Framework for Reporting Environmental and Climate Change Information, December 2019.

Appendices 82
 FINANCIAL POSITION refers to an organization’s assets, liabilities, and equity as reflected on its
balance sheet (actual) or potential assets, liabilities, and equity under different climate-related
scenarios.

GOVERNANCE refers to “the system by which an organization is directed and controlled in the interests
of shareholders and other stakeholders.”145 “Governance involves a set of relationships between an
organization’s management, its board, its shareholders, and other stakeholders. Governance provides
the structure and processes through which the objectives of the organization are set, progress against
performance is monitored, and results are evaluated.”146

GREENHOUSE GAS (GHG) EMISSIONS SCOPE LEVELS147

▪ Scope 1 refers to all direct GHG emissions.

▪ Scope 2 refers to indirect GHG emissions from consumption of purchased electricity, heat, or
steam.

▪ Scope 3 refers to other indirect emissions not covered in Scope 2 that occur in the value chain
of the reporting company, including both upstream and downstream emissions. Scope 3
emissions could include the extraction and production of purchased materials and fuels,
transport-related activities in vehicles not owned or controlled by the reporting entity,
A.
electricity-related activities (e.g., transmission and distribution losses), outsourced activities,
Introduction
and waste disposal.148
B.
INTERIM TARGET refers to a short-term milestone between the organization’s medium- or long-term
Recommendations
target and current period.
C.
Guidance for All Sectors INTERNAL CARBON PRICE refers to a monetary value on GHG emissions an organization uses
internally to guide its decision-making process in relation to climate change impacts, risks, and
D.
opportunities.149
Supplemental Guidance
for the Financial Sector
MANAGEMENT refers to those positions an organization views as executive or senior management
E. positions and that are generally separate from the board.
Supplemental Guidance
for Non-Financial Groups PUBLICLY AVAILABLE 2°C SCENARIO refers to a 2°C scenario that is (1) used/referenced and issued by
an independent body; (2) wherever possible, supported by publicly available datasets; (3) updated on a
F.
Fundamental Principles regular basis; and (4) linked to functional tools (e.g., visualizers, calculators, and mapping tools) that can
for Effective Disclosure be applied by organizations. 2°C scenarios that presently meet these criteria include IEA 2DS, IEA 450,
Deep Decarbonization Pathways Project, and International Renewable Energy Agency.
Appendices

RISK MANAGEMENT refers to a set of processes that are carried out by an organization’s board and
management to support the achievement of the organization’s objectives by addressing its risks and
managing the combined potential impact of those risks.

SCENARIO ANALYSIS refers to a process for identifying and assessing a potential range of
outcomes of future events under conditions of uncertainty. In the case of climate change, for
example, scenarios allow an organization to explore and develop an understanding of how the
physical and transition risks of climate change may impact its businesses, strategies, and
financial performance over time.

145
A. Cadbury, Report of the Committee on the Financial Aspects of Corporate Governance, 1992.
146
OECD, G20/OECD Principles of Corporate Governance, 2015.
147
World Resources Institute and World Business Council for Sustainable Development, The Greenhouse Gas Protocol: A Corporate Accounting and
Reporting Standard (Revised Edition), March 2004.
148
IPCC, Climate Change 2014 Mitigation of Climate Change, 2014.
149
Based on World Bank, “What is Carbon Pricing?,” accessed September 20, 2021.

Appendices 83
 SECTOR refers to a segment of companies performing similar business activities in an economy. A
sector generally refers to a large segment of the economy or grouping of business types, while
“industry” is used to describe more specific groupings of companies within a sector.

STRATEGY refers to an organization’s desired future state. An organization’s strategy establishes a

foundation against which it can monitor and measure its progress in reaching that desired state.
Strategy formulation generally involves establishing the purpose and scope of the organization’s
activities and the nature of its businesses, taking into account the risks and opportunities it faces and
the environment in which it operates.

TRANSITION PLAN refers to an aspect of an organization’s overall business strategy that lays
out a set of targets and actions supporting its transition toward a low-carbon economy,
including actions such as reducing its GHG emissions.

VALUE CHAIN refers to the upstream and downstream life cycle of a product, process, or
service, including material sourcing, production, consumption, and disposal/recycling.
Upstream activities include operations that relate to the initial stages of producing a good or
service (e.g., material sourcing, material processing, supplier activities). Downstream activities
include operations that relate to processing the materials into a finished product and delivering
A. it to the end user (e.g., transportation, distribution, and consumption).
Introduction

B.
Abbreviations
Recommendations
CO2—Carbon dioxide PCAF—Partnership for Carbon Accounting Financials

C.
Guidance for All Sectors CO2e —Carbon dioxide equivalent R&D—Research and development

EEDI—Energy Efficiency Design Index R&DDD—Research, development, demonstration, and

D.
deployment
Supplemental Guidance
for the Financial Sector
EVIC—Enterprise Value Including Cash SASB—Sustainability Accounting Standards Board

E.
Supplemental Guidance FSB—Financial Stability Board SBTi—Science Based Targets initiative
for Non-Financial Groups
TCFD—Task Force on Climate-related Financial
G20—Group of 20
Disclosures
F.
Fundamental Principles GHG—Greenhouse gas USDE—U.S. Dollar Equivalent
for Effective Disclosure

Appendices
GMO—Genetically modified organism WACI—Weighted Average Carbon Intensity

WBCSD— World Business Council for Sustainable

IEA—International Energy Agency
Development

IPCC—Intergovernmental Panel on Climate Change WRI—World Resources Institute

MT—Metric ton

Appendices 84
 Appendix 4: References
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International Council on Mining and Metals. In Brief: Water stewardship framework. 2014.
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[Link].
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Appendices
20, 2016. [Link]/research/Moodys-Auto-sector-faces-rising-credit-risks-due-to-carbon--PR_354984.

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Appendices 85
 Sustainability Accounting Standards Board (SASB). “SASB Climate Risk Technical Bulletin #: TB001-10182016.”
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TCFD. 2018 Status Report. September 26, 2018. [Link]

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[Link].

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[Link].

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A. Status_Report.pdf.
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TCFD. Guidance on Risk Management Integration and Disclosure. October 29, 2020.
[Link]
C.
[Link].
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TCFD. Guidance on Metrics, Targets, and Transition Plans. October 14, 2021.
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van Vliet, Michelle T. H., et al. “Power-generation system vulnerability and adaptation to changes in climate and water
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WBCSD. “Construction and Building Materials TCFD Preparer Forum.” July 1, 2020.
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[Link]

Appendices 86
A.
Introduction

B.
Recommendations

C.
Guidance for All Sectors

D.
Supplemental Guidance
for the Financial Sector

E.
Supplemental Guidance
for Non-Financial Groups

F.
Fundamental Principles
for Effective Disclosure

Appendices

For more information, please visit [Link]

Nothing in this document constitutes an offer or a solicitation of an offer to buy or sell a security or financial instrument or
investment advice or recommendation of a security or financial instrument. The Task Force on Climate-related Financial Disclosures
believes the information herein was obtained from reliable sources but does not guarantee its accuracy. Copyright 2021 The Task
Force on Climate-related Financial Disclosures.

Appendices 87