The global movement of organizations to report and measure the risks and opportunities related to climate change has arrived in Brazil.
From private to public-held corporations, to financial institutions and fund managers, the entire Brazilian business community is being pressured by investors and regulators to join this trend led, in large part, by the Task Force on Climate-related Financial Disclosures (TCFD).
See below 5 relevant points about TCFD and how organizations can engage:
1. What is the TCFD: In 2015, the G20 (a group of 20 Ministers of Economy and Directors of Central Banks) requested the Financial Stability Board (FSB) to bring together public and private sector agents to assess how the financial market could contribute to climate issues.
The FSB then created the Task Force on Climate-related Financial Disclosures (TCFD).
2. What does TCFD do? TCFD is a task force to prepare a set of recommendations to be voluntarily and gradually adopted by organizations that raise funds in the financial and capital markets, aiming to help investors, lenders and insurers to measure the transition stage of the business of such organizations to a low-carbon model, as well as the risks and opportunities that will be generated from it.
3. What are the TCFD Recommendations? The TCFD recommendations were developed around 4 thematic areas, which represent the fundamental elements of how organizations operate: (i) governance, (ii) strategy, (iii) risk management and (iv) metrics/objectives.
Governance deals with how the organization manages risks and opportunities associated with climate change. In strategy, the aim is to assess real and potential threats and opportunities. In risk management, the aim is to measure the processes used to identify, assess and manage risks associated with the climate. In metrics/goals, measurement forms and targets are considered.
4. How many organizations have endorsed the TCFD recommendations: 1800+ organizations around the world have already voluntarily endorsed the TCFD recommendations and numerous of them are in the process of effective implementation.
Its relevance gained momentum in January 2020 when Larry Fink, CEO of Blackrock, one of the largest asset managers in the world, published a letter addressed to the CEOs of its invested companies asking them to take the necessary steps to comply with the TCFD recommendations.
5. What type of organization can endorse/implement the TCFD recommendations and why they are relevant: All Brazilian organizations, from private and public-held corporations, to financial institutions and fund managers, can endorse TCFD’s recommendations and implement them.
It is a fact that all those which wish to raise funds in the financial and capital markets in the coming years will be increasingly required by investors, lenders and insurers to report and measure the risks and opportunities related to climate change in their business, particularly in the green finance and bonds markets.