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Only two years after the final Task Force on Climate-related Financial Disclosures (TCFD )recommendations were published, support has sky-rocketed and conversations about climate-related financial risks have moved from the fringes to the forefront.
The demand for TCFD disclosure is now enormous. Current supporters control balance sheets totalling $120 trillion and include the world’s top banks, asset managers, pension funds, insurers, credit rating agencies, accounting firms and shareholder advisory services.
As the volume of disclosures has increased, so has their sophistication. Companies, financial firms and policymakers increasingly recognise that disclosures must go beyond the static to the strategic. Climate risks have a number of distinctive elements, which, in combination, require a strategic approach.
The Bank’s supervisory body - the Prudential Regulation Authority (PRA) – surveyed banks in the UK last year and found that almost three quarters are starting to treat the risks from climate change like other financial risks – rather than viewing them simply as a corporate social responsibility issue.
Although the private sector has made rapid progress on reporting and risk management, more is required. Over the next few years, companies, their banks, insurers and investors must:
Looking ahead, the TCFD is currently considering how to:
Mr Carney concludes: “The TCFD provides the necessary foundation for the financial sector’s role in the transition to net zero that our planet needs and our citizens demand.
“So whether the TCFD is used to manage the growing physical and transition risks from climate change or to finance the enormous opportunities to develop more resilient and sustainable economies, your work to develop the TCFD and spread its adoption is literally vital.”
Full speech on Bank of England