TCFD report launch: Key comments from Carney, Bloomberg, Schapiro, Lindeijer

Bank of England Governor and Chair of the Financial Stability Board Mark Carney has said the newly released report from the Task Force on Climate Related Financial Disclosures (TCFD) represents a breakthrough in managing the risks and opportunities related with climate change.

Speaking this week at the launch of the report, held at the Tate Modern gallery that is housed in a former oil-fired power station, Carney said it provided a disclosure framework that is sufficiently comprehensive for use by all publicly listed companies, whatever their sector, to account for the full set of climate related risks and opportunities they face.

He highlighted that the report recommends actionable, decision-useful information for providers of capital. Speaking in a panel session after him, Mary Schapiro, former Chair of the US Securities and Exchange Commission and special advisor to TCFD chair Michael Bloomberg, said the approach of not requiring every piece of information related to climate change from organisations would make it as cost-effective as possible.

The TCFD report recommends that disclosure focuses on four strands – governance, strategy, risk management and the metrics used when thinking about climate related risk. Schapiro said that these were areas that companies deal with every day: “By incorporating climate risk into their way of thinking when developing a strategy, or a board thinking about risk management and responsibilities, it may be easier for companies taking that next step on incorporating climate risk because it works with the structures they already have.”

Added to this, there is sector specific guidance for industries with the biggest carbon footprint, such as utility companies and transport.

In his speech, Carney also highlighted that it was innovative that the report extended the scope to disclosure for asset owners and asset managers. “There is a desire for the beneficiary to understand what the footprint or exposure is and what’s suggested is to make disclosure of aggregate GHG emissions embodied in investment portfolios,” he said.

But he added a caveat: “Let me state something which is very obvious. The ability of investors to do this depends on adoption of companies.I fully realise there is a sequencing here and a lag in terms of that and obviously we look for that to build.”

Perhaps not surprisingly, all members of the TCFD this week committed to help this building work by pledging their support for the disclosure recommendations.

The roster includes some of the world’s biggest companies and investors, including Unilever, JPMorgan, Tata Steel, Dow Chemical, BlackRock, PGGM and Aviva Investors.

And the numbers they represent are significant. Collectively, they are companies with a market capitalisation of trillion and a half US dollars and institutional capital, controlling £20trn, said Carney.

Additionally, there is already at least one country initiative focused on supporting the TCFD recommendations. Speaking at the report launch, TCFD member Eloy Lindeijer, Chief, Investment Management at Dutch pension investor PGGM, said there was a platform in Netherlands dedicated to implementing the recommendations coming out of the TCFD at a national level, including banks, financial institutions, insurance companies and other long term investors.

Internationally, he said something similar was emerging too. “Large investors are meeting each other and seeing how they can take on these recommendations particularly using increased awareness at a corporate level to jointly engage with these companies. That’s going to be very important for us going forward.”

The TCFD approach is firmly market-focused. Bloomberg said his eyes usually glaze over when politicians argue about climate change. “Business leaders don’t have the luxury of debating if something is happening. CEOs have the tough job of anticipating and taking the right precautions,” he said.

Carney shared this sentiment. “With the right information you can have optimists and pessimists, sceptics and evangelists backing their convictions with capital,” he said.

“That is what a true market is. You can have a different view but how well can you express it without the right information? This is about giving people the right information.”