In response to the Task Force on Climate-related Financial Disclosures’ (TCFD) public consultation ahead of an update on its recommendations, CDP has gathered its key feedback and comments, considering the continually evolving landscape of environmental disclosure and the latest climate science.
Environmental disclosure is now an expected business norm, demanded by capital markets and customers, with tangible benefits that range from brand value to risk management and regulatory alignment.
CDP has long since been a supporter of the TCFD. In 2018, we updated our disclosure platform to align with the TCFD recommendations and facilitate more widespread market adoption.
CDP will always advocate for a higher level of ambition to aid in the transition to a low-carbon economy, in accordance with the latest climate science. We strongly support the TCFD and are encouraged by this update to its recommendations. We are particularly glad to see the TCFD’s inclusion of transition plans which, if implemented correctly, could act as a vital accountability mechanism between corporates and their stakeholders.
With this in mind, we have made a number of suggestions supporting the TCFD to go further in its requirements and challenge companies to set stricter short-term science-aligned targets to align with the Paris Agreement. These include:
- Amending targets, from a 2°C or below world, up to a more ambitious 1.5°C world. The TCFD has a pivotal role to play in ramping up corporate climate action, alongside regulation, so 1.5°C should be the focal point to avoid the worst consequences of climate change.
- Making interim targets key. Adding to the TCFD’s existing inclusion of interim targets, we advise stronger wording to make these a requirement alongside mid-term to long-term objectives.
- The TCFD recommendations on portfolios should be science-based, practical, and aim to drive greater transparency and consistency. CDP advocates for the recommendations to use physical intensity targets based on science or absolute reduction targets. CDP also believes multiple scenarios are needed to benchmark companies, not just one – this is needed to create a more stable and credible average.
A milestone moment for the TCFD and the global reporting landscape
Since COP21, and again with the release of the TCFD’s recommendations in 2017, we have seen a significant shift in corporate environmental reporting. The TCFD is being mainstreamed, even being acknowledged in a G7 communique last month which expressed support for moving towards mandatory climate-related financial disclosures based on the TCFD framework.
A significant gear change came with the announcement by the IFRS in April 2021 to develop a climate-related standard, based on the TCFD. This climate standard could be adopted by more than 140 countries, essentially making TCFD-aligned disclosures mandatory around the world.
Branching out disclosure for people and planet
TCFD-aligned mandatory disclosure is gaining traction across the globe and more governments are expected to implement it in future. However, while this is an important step forward, it should be a stepping-stone to wider environmental disclosure.
Disclosure needs to go beyond purely financial and risk-based data, and its scope must encompass the emerging understanding of the broader context of what can be defined as ‘climate information’. As we expand our understanding of interconnected impacts, companies must be careful not to use overly narrow materiality assessments - closing the door to potential critical linkages. In the area of interlinkages and emerging understanding of impacts, such a limitation would prejudge reporting and limit it to current understanding, not growing scientific discovery.
Indeed, such data already intrinsically includes water, forests and many more. To allow for an efficient transition to a low-carbon economy, companies should disclose on their impacts on people and planet, and on a wide range of environmental topics, such as water security, deforestation, biodiversity and nature.
Read CDP’s response to the TCFD’s July 2021 consultation here