Tag: Financial Stability Board’s Task Force on Climate-related Financial Disclosures
Financial Stability Oversight Council reports on climate-related financial risk
Recently, when asked about how all of the U.S. agencies coordinate on climate issues, SEC Commissioner Allison Herren Lee observed that one way agencies coordinate is through the Financial Stability Oversight Council. The FSOC, which is chaired by U.S. Treasury Secretary Janet Yellen and includes SEC Chair Gary Gensler as a member, has just issued a new report on climate-related financial risk. The report concludes that climate-related financial risk is “an emerging threat to the financial stability of the United States.” Some of the discussions and recommendations in the report are remarkably congruent with recent comments from Gensler about expected SEC climate disclosure regulation. Are we starting to get an idea of what to expect?
Task force provides framework and guidance for climate-related financial disclosures
The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) has recently issued its exhaustive final report—Recommendations of the Task Force on Climate-related Financial Disclosures—and supporting materials, designed to provide a standardized framework and detailed guidance for “voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders.” To develop its recommendations, the task force spent 18 months consulting with a wide range of business and financial leaders. According to the press release, “[o]ver 100 business leaders and their companies with a combined market cap of around $3.5tn and financial institutions responsible for assets of about $25tn have publicly committed to support the recommendations.” The disclosure recommendations are organized around four core elements—governance, strategy, risk management and metrics and targets. The Task Force also developed supplemental guidance for financial industries along with companies in energy, transportation, materials and building and agriculture food and forest products. This type of information is expected to enable markets to better “price risk” and allow investors to make more informed decisions. The task force urged companies to include this information as part of their annual SEC or comparable filings to ensure the application of adequate governance processes. Although there is no specific timeframe for adoption, the task force encouraged companies to adopt as soon as possible, keeping in mind that climate reporting will certainly evolve over time.
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