Insight from India: Status of TCFD in India
Data: 12/05/2018
Author: Udit Varshney
Picture Credit: Martin Jernberg
Picture Source: Unsplash
The Paris Agreement, signed by 195 countries in December 2015, not only signaled a step
change in the way governments are addressing climate change but also the need for businesses to
review the emerging risks rising from the lower carbon transition.
The Task Force on Climate-related Financial Disclosures (TCFD) was launched in the same
month by Mark Carney, Chair of the Financial Stability Board (FSB) and Governor of the Bank
of England, with the support of the G20. The Financial Stability Board Task Force on Climate-
related Financial Disclosures (TCFD) is a market-driven initiative, set up to develop a set of
recommendations for voluntary and consistent climate-related financial risk disclosures in
mainstream filings. Companies will therefore be better guided in providing information to
investors, lenders, insurers, and other stakeholders.
195 countries in December 2015 signed up The Paris Agreement showcasing the change required
in the policies and methods being implemented by the governments pertaining to climate change
as well as indicating the need for business enterprises to develop better mitigation strategies to
fight against the new risks and threats arising from the low carbon transition
Mark Carney, Chair of the Financial Stability Board (FSB) and Governor of the Bank of England
vis-à-vis support of the G20, in the same month TCFD (Task Force on Climate-related Financial
Disclosures) was launched. TCFD was setup to establish set of instructions and
recommendations for gratuitously voluntary but persistent climate related financial risk
disclosures in prevailing filings. The initiative for TCFD was mainly market driven. Hence, it
aims to assist businesses to provide better information and data to lenders, investors and other
third part stake holders.
Why should organizations report with the TCFD recommendations?
The main reason behind this could be risk management. Amongst various factors influencing a
company’s financial performance are a lot of physical, regulatory and marketplace risks from
climate related environmental impacts. This financial performance would include factors such as
their ability to repay loans, insurance premiums, and all this ultimately has a huge impact on all
the stakeholders such as shareholders, creditors, pension funds, insurers and banks. Hence the
disclosures become in the interest of all market participants to require and disclose data from
their investee companies on environmental risks. This ensures accurate pricing of risks and hance
supports informed investment decisions. Another important reason for organizations to make
disclosures under the TCFD recommendations is the potential business opportunities that
potentially arise due to transition to a low-carbon economy.
Estimations say that USD 1 trillion per year will be needed of investment in low-carbon
technology for the foreseeable future if Paris Agreement goral are to be met. All the companies
creating products and services that enable this transition may be in to a winning situation,
however all those companies that persist with carbon intensive activities could be among the
losers. All the financial institutions will identify which companies are the winner and profit from
them.
Global 20 members have engaged with the TCFD
Approximately two thirds of G20 member states have engaged with the TCFD recommendations
in some form. The majority of that engagement has taken the form of statements of support for
the aims and recommendations of the Task Force. Australia, Canada, the EU, Italy, Japan, South
Africa, Turkey and the United Kingdom have conducted consultations with the private sector on
sustainable finance generally and on disclosure requirements as an important building block of
sustainable finance more specifically. Based on these consultations, Japan has issued voluntary
disclosure guidelines and the EU has put together a firm action plan on how to incorporate the
recommendations into existing disclosure frameworks. Finally, although France’s Article 173
was not enacted in response to the TCFD, it is broadly aligned with the TCFD requirements and
provides a mandatory disclosure framework.
In one form or another approximately two thirds of G20 member states have undertaken TCFD
recommendations and suggestions. Majority of this endeavor has supplemented the support for
TCFD’s aims. The EU, Australia, Italy, Canada, South Africa, Turkey, Japan and the United
Kingdom have engaged into consultations with the private sector regarding sustainable finance in
general and on disclosure requirements as an imminent foundation stone of sustainable finance in
particular. The EU laid down as sturdy action plan to incorporate the recommendations into their
existing disclosure frameworks. Also, Japan issued voluntary disclosure guidelines. Despite the
fact that France’s Article 173 was not formulated in unanimity with the TCFD, it was mostly
aligned with the TCFD requirements and suggests a mandatory disclosure framework.
Picture source: CISL
Picture source: CISL
Both of the above chart show that how countries are engaging with TCFD
TCFD top companies to make the commitments
A group of ten companies across seven sectors become the first companies to make the
commitment to implement the recommendations of the Task Force on Climate-related Financial
Disclosures within three years. They will be disclosing information about the financial
implications of climate-related risks and opportunities to understand how their business can
adapt to a changing climate and exploit the opportunities that the low-carbon economy is already
creating.
The first signatories – Aviva plc, Royal DSM, Enagás, Ferrovial, Iberdrola, Marks & Spencer,
Philips Lighting, Sopra Steria Group, Wipro Ltd and WPP – were announced today at two key
sessions of Climate Week NYC, including World Economic Forum’s first Sustainable
Development Impact Summit. The sessions highlighted the urgency of scaling up high-quality
disclosure of climate-related information, to allow companies and investors to make better
decisions about their capital allocation risks.
Across seven sectors, ten companies clustered together to become the pioneer companies to
pledge to enforce the recommendations of TCFD within a span of three years. They agreed to
disclose information about the financial impact of climate related risks and challenges to allow
their business to get accustomed with ever changing climate and to redeem the opportunities
created by low carbon economy.
During two key sessions of Climate Week NYC, the first signatories were announced today
which included World Economic Forum’s First Sustainable Development Impact Summit.
Pioneer signatories can be enlisted as Aviva plc, Royal DSM, Enagás, Ferrovial, Iberdrola,
Marks & Spencer, Philips Lighting, Sopra Steria Group, Wipro Ltd and WPP. These sessions
targeted upon the urgent need for adhering to high quality disclosure of data and information
related to climate which in turn will facilitate decision making power of companies, investors
and other stakeholders.
How companies can engage in the initiative?
For commitments companies are requested to follow following process
Agree with the wording of the commitment
Sign the commitment
Report climate related financial information following the TCFD recommendations as
fully as practicable within three years from the date of the commitment.
Use the CDSB framework or other applicable reporting frameworks to produce such
information on a common and consistent basis
Growing support for TCFD and its work
Source: FSB-TCFD
Indian companies performance on TCFD
The report evidences that India has done nothing in terms of following the Task Force’s
recommendations, even if there are other environmental risk disclosure guidelines in place.
The Securities and Exchange Board of India has introduced a requirements to produce business
responsibility reports for the top 100 listed entities in 2012. It was increased to the 500 largest
listed companies in 2016, there is no evidence of specific TCFD-compliant initiatives.
513 organizations have expressed their support for the TCFD as of the One Planet Summit held
in New York on September 26, 2018. Picture below reflects all the current supporters from India.
Picture Source: TCFD
Tata Steel
To lay an emphasis on Climate related financial disclosures, TV Narendran, MD Tata Steel India
& SEA (South East Asian Operations) joined over 100 other business leaders. They also
committed their support for recommendation son the Task Force on Climate-related Financial
Disclosures.
As an institution, Tata Steel Group is committed to support the TCFD’s voluntary
recommendations as these disclosures prove out to be an important step going forward to enable
market forces to do efficient allocation of capital and support a smooth transition to a low-carbon
economy.
Yes Bank
Yes Bank, the fourth largest Private sector bank of India had released its sustainability
performance review for FY 2017-18 called as “Future now”. By releasing this report, YES
BANK has becomes the first Indian bank to release enhanced sustainability disclosures
according to the TCFD recommendations. The report also adheres to the GRI standards reporting
framework choosing to report as per the “In accordance – comprehensive option” emphasizing
that it includes response on all identified material issues through stakeholders’ consultation and
dialogue. This report has been assured by KPMG, to make it at par with global peers.
Wipro Limited: Anurag Behar, Chief Sustainability Officer, Wipro Limited said, “Climate
change increasingly poses serious threats to the stability of our economic system. It is critical
that businesses continue to report consistent, comparable and reliable information on climate
change impacts and opportunities to their stakeholders. We already report on our climate change
programs, risks and opportunities to CDP, and this initiative will help us progress further on our
work in integrated mainstream reporting. This will help us better manage climate-related risks
and tap the economic opportunities arising out of a more sustainable economy.
Chief Sustainability Officer of Wipro Limited, Anurag Behar, perceiving the increasing grave
threats of climate change to the balance of the economic system, suggested that businesses
should continue to reliable and consistent information which can be compared and analyzed by
the stakeholders. This initiative will help to progress the climate change programs in integrated
mainstream reporting. Also, it will help to manage climate related risks in a much better way and
to explore the opportunities that rise.
TCFD Official recommendations
Tata Steel
Down to earth TCFD Performance
Yes Bank
TCFD Introduction
https://www.cdsb.net/task-force/722/global-leading-companies-commit-disclose-climate-risks-within-
three-years
https://www.cdsb.net/what-we-do/task-force-climate-related-financial-disclosures/commit-implement-
recommendations-task
