Task Force on Climate-related Financial Disclosures (TCFD)

What is TCFD?

The Task Force on Climate-related Financial Disclosures (TCFD) was created in December 2015 by the Financial Stability Board (FSB) at the specific request of G20 Finance Ministers and Central Bank Governors. It was established to address a basic failure in global financial markets: investors had no reliable, comparable data on which to appropriately price climate-related risk.

In 2017, the TCFD released its landmark Final Report with 11 voluntary recommendations structured around four disclosure themes: Governance, Strategy, Risk Management, and Metrics & Targets. The aim was clear — to arm investors, lenders, and insurers with organised information to enable them to make informed decisions in a world constrained by climate.

The adoption has also been swift. As of November 2022, more than 4,000 organisations in 101 jurisdictions had supported the framework, which represents a total market capitalisation amounting to USD 27 trillion.

What initially started as voluntary reporting has continued to shift towards the regulatory space, with the UK, EU, Japan, Singapore, and Canada, among others, either requiring or formally incorporating TCFD-aligned disclosures.

Why TCFD is Important for Businesses

TCFD disclosure is no longer simply a reporting exercise; it has become a signal of strategic credibility. Here is why it matters:

• Investor confidence: Investors are asking for more and more transparency about climate risks before making capital allocation decisions; TCFD-compliant disclosures offer the framework they seek.
• Regulatory preparedness: Regulatory requirements are already effective in the UK and are being implemented throughout the EU, Japan, and Singapore, so early alignment is essential rather than optional.
• Risk clarity: TCFD assists organisations to understand the physical risks (extreme weather, floods, disruption of supply chains) and transition risks (carbon pricing, change in policy, stranded assets) prior to becoming financial burdens.
• Competitive positioning: Organisational disclosure is associated with building trust with stakeholders, drawing in sustainability-minded capital, and minimising reputational risk.

TCFD Framework – 4 Pillars Explained

The TCFD's recommendations are structured around four interconnected pillars, each addressing a different dimension of how climate risk flows through an organisation.

Climate Risks Under TCFD

The TCFD classifies climate-related financial risks into two categories:

• Physical Risks: Direct impacts from climate change, including acute events (extreme weather, floods) and chronic shifts (rising temperatures, sea-level rise) that can damage assets, disrupt supply chains, and increase operating costs.
• Transition Risks: Risks arising from the shift to a low-carbon economy, including policy and regulatory changes, carbon pricing, technological disruption, and shifts in market preferences that can affect asset valuations and business models.

TCFD Disclosure Requirements

The TCFD sets out 11 recommended disclosures spread across its four pillars, not as a rigid checklist, but as a structured roadmap for meaningful, investor-grade TCFD reporting.

Governance

• Board oversight of climate-related risks and opportunities
• Management's role in assessing and managing those risks

Strategy

• Climate risks and opportunities across short, medium, and long-term horizons
• Their impact on business, strategy, and financial planning
• Strategic resilience under different climate scenarios, including a 2°C pathway

Risk Management

• Processes for identifying and assessing climate-related risks
• Processes for managing those risks
• Integration of both into the overall risk management

Metrics & Targets

• Metrics used to assess climate-related risks and opportunities
• Scope 1, 2, and, where appropriate, Scope 3 GHG emissions
• Targets used to manage climate risks and progress against them

Oren's TCFD Implementation Approach

Most organisations know they need to act on TCFD. The challenge is knowing where to start and how to move through the process without losing momentum or creating duplication across teams. Oren simplifies that journey from the very first step.

Step 1: Climate Risk Identification

Oren assists organisations to determine and quantify climate-related risks and opportunities throughout operations and supply chains, to have a clear and evidence-based base before any disclosure work begins.

Step 2: Scenario Analysis

After that, we guide teams through structured climate scenario analysis, including a 2°C or lower pathway, to test the resilience of your business strategy in the face of various possible future conditions and surface risks that are not part of the normal risk register.

Step 3: Governance Setup

Oren supports the integration of climate considerations directly into board-level governance and management accountability structures, so TCFD is embedded into how decisions are made, not treated as a separate reporting exercise.

Step 4: Automated Data Mapping

Oren maps climate-related data to the corresponding TCFD recommendations and disclosures intelligently using our TCFD software, eliminating the need to manually work on them and enhancing the accuracy of all four pillars.

Step 5: Reporting & Disclosure Integration

At last, Oren generates structured, TCFD-compliant reports through a robust TCFD reporting platform that clearly communicates climate strategy, performance, and targets to investors and stakeholders, with alignment to IFRS S1 and S2 built in from the outset. Our IFRS S1 and S2 services ensure organisations meet both climate and sustainability disclosure standards seamlessly, fully supported by an IFRS S1 and S2 solution designed for long-term compliance.

Metrics & Targets in TCFD

Metrics and targets are where TCFD disclosure moves from narrative to accountability. They are the quantitative proof that an organisation's climate strategy is grounded in real data, not just good intentions.

GHG Emissions (Scope 1, 2 & 3)

The cornerstone of TCFD metrics:

• Scope 1 covers direct emissions from owned operations
• Scope 2 covers indirect emissions from purchased energy
• Scope 3 captures the broader value chain — suppliers, logistics, and end-use — where the largest share of most organisations' footprint typically sits

Carbon Intensity

Emissions normalised against a business metric such as revenue, production output, or employee headcount, enabling meaningful year-on-year comparison and clearer communication with investors.

Climate Targets

Including net-zero commitments or science-based targets, with clearly disclosed timelines, base years, and progress milestones.

Capital Allocation (CapEx Alignment)

The proportion of capital expenditure directed towards low-carbon assets, technologies, or transition activities, signalling that financial decisions are aligned with climate commitments.

Consequences of Not Adopting TCFD

Avoiding TCFD is not a neutral choice; it carries real and growing consequences.

• Investor Distrust: Institutional investors increasingly expect TCFD-aligned disclosures before committing capital; organisations that cannot provide them are routinely screened out of consideration altogether.
• Capital Risk: Without structured climate disclosure, organisations face higher costs of capital, reduced access to green finance, and growing difficulty attracting sustainability-focused investment.
• Regulatory Pressure: In jurisdictions where TCFD is now mandatory, such as the UK, non-disclosure carries direct legal and compliance consequences, with more markets following suit.
• Transition Risk Exposure: Organisations that delay TCFD adoption are also delaying the identification of transition risks — policy shifts, carbon pricing, and stranded assets — leaving themselves financially exposed while peers are already adapting.