TCFD WORKSHOP
Session 3 - Strategy

February 2022

TCFD Series of Workshops
Session1

Fundamentals and Overview of TCFD

2

TCFD Recommendation:
Governance3

TCFD Recommendation:
Strategy

4

TCFD Recommendation:
Risk Management

5

TCFD Recommendation:
Metrics & Targets

This session

2

Contents
Introduction

4

Overview of the Strategy recommendation

10

Q&A

38

Appendix: Supplemental guidance for the financial sector and nonfinancial groups

39Introduction

4

Introduction to the Strategy Recommendation
In this session, we will drill down on the Strategy recommendation
Core Elements of the TCFD Recommendations
Governance

Governance

Strategy
RiskManagement

Metrics
and Targets

Disclose the company’s governance around climate-related risks andopportunities
Strategy
Disclose the actual and potential impacts of climate-related risks andopportunities on the company’s businesses, strategy, and financial
planning
Risk Management
Disclose the processes used by the company to identify, assess, andmanage climate-related risks
Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant
climate-related risks and opportunities

Note: The Task Force uses the term “companies” to refer to entities with public debt or equity as well as asset managers and asset owners, including publicand private-sector pension plans, endowments, and foundations.
Source: TCFD, Recommendations of the Task Force on Climate-related Financial Disclosures, 20175

Introduction to the Strategy Recommendation (continued)

The Task Force’s Strategy recommendation is supported by three recommended disclosures
Governance

Strategy

Risk Management

Metrics and Targets

Disclose the company’s governancearound climate-related risks andopportunities.

Disclose the actual and potential
impacts of climate-related risks andopportunities on the company’sbusinesses, strategy, and financial
planning where such information ismaterial.

Disclose how the company
identifies, assesses, and manages
climate-related risks.

Disclose the metrics and targets
used to assess and manage relevant
climate-related risks andopportunities where suchinformation is material.

Recommended Disclosures

Recommended Disclosures

Recommended Disclosures

Recommended Disclosuresa) Describe the board’s oversight ofa) Describe the climate-related risks
and opportunities the company
has identified over the short,medium, and long term.

a) Describe the company’s
processes for identifying andassessing climate-related risks.

a) Disclose the metrics used by thecompany to assess climaterelated risks and opportunities inline with its strategy and risk
management process.

b) Describe management’s role inb) Describe the impact of climaterelated risks and opportunities on
the company’s businesses,
strategy, and financial planning.

b) Describe the company’s
processes for managing climaterelated risks.

b) Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhousegas (GHG) emissions, and therelated risks.

c) Describe the resilience of thecompany’s strategy, taking into
consideration different climaterelated scenarios, including a 2°C
or lower scenario.

c) Describe how processes for
identifying, assessing, andmanaging climate-related risks
are integrated into thecompany’s overall risk
management.

c) Describe the targets used by thecompany to manage climaterelated risks and opportunities
and performance against targets.

climate-related risks andopportunities.

assessing and managing climaterelated risks and opportunities.

Source: TCFD, Recommendations of the Task Force on Climate-related Financial Disclosures, 20176

Introduction to the Strategy Recommendation (continued)
Various TCFD publications offer guidance on the Strategy recommendation
Final
Recommendations
and Recommended
Disclosures

Legend:Provides details on the following:• Context and background on the need for climate-related
financial disclosures

Publication includes guidanceon Strategy recommendation• The Task Force’s remit from the Financial Stability Board
2017 Report• TCFD general framework, including recommendations
and recommended disclosures
Provides guidance on the application of the recommendations
as well as implementation guidance for the following:

Implementation
Guidance• All sectors• Four financial industries
2021 Implementation
Guidance (Annex)• Four groups of non-financial companies the Task Forceconsiders more likely to be affected financially than others
given their exposure to certain transition and physical risks

Additional
Supporting Materials

2017 Scenario Analysis
Technical Supplement

2020 Guidance on Risk
Management Integration
and Disclosure

2020 Guidance on
Scenario Analysis for
Non-Financial Companies

2021 Guidance on
Metrics, Targets, andTransition Plans

Visit fsb-tcfd.org/publications to access all of the Task Force’s reports, guidance, and other materials.

7

Disclosure Varies Across Recommendations

The Strategy recommendation includes both the most and least disclosed recommended disclosureswith over 50% of companies assessed disclosing information on risks and opportunities, but only
13% disclosing information on their strategy’s resilience
TCFD-Aligned Disclosure by Year, for Each Recommended Disclosure
Recommendation
Governance

Strategy

Risk Management

Recommended Disclosurea) Board Oversight16b) Management's Role

9a) Climate-Related Risks andOpportunities

14b) Impact on Company

13c) Resilience of Strategy

8a) Risk Identification andAssessment Processesb) Risk Management
Processesc) Integration into Overall
Risk Managementa) Climate-Related Metrics

Metrics and Targets% Point Change’18–’20b) Scope 1, Scope 2, andScope 3 GHG Emissionsc) Climate-Related Targets

FY 2018

9%

9%

13%

25%

11%

18%
38%
26%

5%

7%

14%
10%

30%

42%

52%

39%

13%
16%

15

20%

30%

17%

29%

17%

27%
34%

10
27%

10
13

FY 2020% of Companies Disclosing Information
Aligned with TCFD Recommended Disclosures

14

17

FY 2019

21%

24%

31%

40%

44%

37%
34%

Note: Results are based on the Task Force’s artificial intelligence analysis of 1,651 public companies.
Source: TCFD, 2021 Status Report, 2021

8

Importance of the Strategy Recommendation

Disclosing in line with the Strategy recommendation provides information to investors and otherusers to better assess the potential future performance of the company
Providing Decision Useful Information to Investors and Other Users
Three of the top ten most “decision useful” types of information companies can disclose fall under the Strategy
recommendation.1
Recommended Disclosure Disclosure Element*

Rank

Strategy b)

How climate-related issues have affected business and strategy

1

Metrics and Targets a)

Key metrics on climate-related issues for most recent period and historical periods

2Strategy a)

The material climate-related issues identified for each sector and geography

3

Metrics and Targets b)

Scope 1 GHG emissions for the most recent period and historical periods

4

Metrics and Targets c)

Climate-related targets related to GHG emissions

5

Strategy a)

The material climate-related issues identified

6

Metrics and Targets b)

Scope 2 GHG emissions for the most recent period and historical periods

7

Metrics and Targets c)

The timeframes over which climate-related targets apply

8

Metrics and Targets c)

Key performance indicators used to assess progress against climate-related targets
Board consideration of climate-related issues for major capital expenditures, acquisitions, anddivestitures9

Governance a)

10* These disclosure elements are segments of the guidance under each recommended disclosure. They do not encompass all of theinformation conveyed in each recommended disclosure.
1. These findings are based on a survey in which users were asked to rate the usefulness of specific disclosure elements associated with the 11
recommended disclosures when making financial decisions.
Source: TCFD, 2020 Status Report, 20209

Overview of the Strategy
recommendation

10Structure of the Strategy Recommendation Overview Section

The overview of each of the three recommended disclosures under the Strategy recommendation
will follow the structure provided belowi.

Describing the guidance for all sectors
associated with the recommended disclosure

ii. Drilling down into specific elements of therecommended disclosureiii. Providing examples of reporting that alignwith the recommended disclosure

11

Recommended Disclosure Strategy a)

The first recommended disclosure under the Strategy recommendation — Strategy a) — asks
companies to describe their climate-related risks and opportunities
Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the company’s businesses, strategy, andfinancial planning where such information is material.
All Sectors
Recommended
Disclosure a)
Describe the climaterelated risks andopportunities thecompany has
identified over the
short, medium, andlong term

Companies should provide the following information:
 Describe what is considered the relevant short-, medium-, and long-term time horizons, taking into
consideration the useful life of the company’s assets or infrastructure and the fact that climate-related issues
often manifest themselves over the medium and longer terms;
 Describe the specific climate-related issues potentially arising in each time horizon (short, medium, and longterm) that could have a material financial impact on the company; and Describe the process(es) used to determine which risks and opportunities could have a material financial impact
on the company.
Companies should consider providing a description of their risks and opportunities by sector and/or geography, as
appropriate.

Source: TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

12

Strategy a): Climate-Related Risks and Opportunities
Examples of Climate-Related Risks
Acute• Increased severity of extreme weather events
such as cyclones and floods
Physical
Risks

Transition
Risks

Chronic• Changing weather patterns and rising mean
temperature and sea levels
Policy and Legal• Increased pricing of GHG emissions• Enhanced emissions-reporting, obligations• Mandates on and regulation of existing products
and services• Exposure to litigation
Technology• Substitution of existing products and services withlower emissions options• Unsuccessful investment in new technologies• Costs to transition to lower emissions technology
Market• Changing customer behavior• Uncertainty in market signals• Increased cost of raw materials
Reputation• Shifts in consumer preferences• Stigmatization of sector• Increased stakeholder concern or negative
stakeholder feedback

Examples of Climate-Related Opportunities

Resource
Efficiency

EnergySourceProducts& Services

Markets

Resilience• Use of more efficient modes of transport andproduction and distribution processes• Use of recycling• Move to more efficient buildings• Reduced water usage and consumption••••

Use of lower-emission sources of energy
Use of supportive policy incentives
Use of new technologies
Participation in carbon market• Development and/or expansion of low emission
goods and services• Development of climate adaption and insurance
risk solutions• Development of new products or services
through R&D and innovation• Access to new markets• Use of public-sector incentives• Access to new assets and locations needing
insurance coverage• Participation in renewable energy programs andadoption of energy-efficiency measures• Resource substitutes/diversification

Source: TCFD, Recommendations of the Task Force on Climate-related Financial Disclosures, 201713

Example of Disclosure for Strategy a)

Describe the climate-related risks and opportunities the company has identified over the short,medium, and long term
Example Disclosure: British Land (Real Estate Investment Trust)
TCFD alignment: the following
example provides an overview
of climate-related physical andtransition risks, as well asclimate-related opportunities
identified by British Land overthe short term and medium
term. This example includes
definitions for each time
horizon but does not describe
long-term risks andopportunities. The impacts on
corporate strategy andfinancial planning are also
included for each example
provided.

Source: British Land, Annual Report and Accounts 2021, 2021, p. 50.
Note: : Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure. They
may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

14

Example of Disclosure for Strategy a) (continued)

Describe the climate-related risks and opportunities the company has identified over the short,medium, and long term
Example Disclosure: British Land (Real Estate Investment Trust)
TCFD alignment: the following
example provides an overview
of climate-related physical andtransition risks, as well asclimate-related opportunities
identified by British Land overthe short term and medium
term. This example includes
definitions for each time
horizon but does not describe
long-term risks andopportunities. The impacts on
corporate strategy andfinancial planning are also
included for each example
provided.

Source: British Land, Annual Report and Accounts 2021, 2021, p. 50.
Note: : Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure. They
may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

15

Strategy b)

Strategy b) asks companies to disclose the impact of climate-related risks and opportunities
Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the company’s businesses, strategy, andfinancial planning where such information is material.
All Sectors
Recommended
Disclosure b)
Describe the impact
of climate-relatedrisks andopportunities on thecompany’s
businesses, strategy,
and financial
planning

Building on recommended disclosure (a), companies should discuss how identified climate-related issues have affected
their businesses, strategy, and financial planning.
Companies should consider including the impact on their businesses, strategy, and financial planning in the following: Products and services
 Supply chain and/or value chain Adaptation and mitigation activities
 Investment in research and development
 Operations (including types of operations and location of facilities)
 Acquisitions or divestments Access to capitalCompanies should describe how climate-related issues serve as an input to the financial planning process, the time
period(s) used, and how these risks and opportunities are prioritized. companies’ disclosures should reflect a holistic
picture of the interdependencies among the factors that affect their ability to create value over time.
Companies should describe the impact of climate-related issues on their financial performance (e.g., revenues, costs)
and financial position (e.g., assets, liabilities). If climate-related scenarios were used to inform the company’s strategy
and financial planning, such scenarios should be described.
Companies that have made GHG emissions reduction commitments, operate in jurisdictions that have made suchcommitments, or have agreed to meet investor expectations regarding GHG emissions reductions should describe theirplans for transitioning to a low-carbon economy, which could include GHG emissions targets and specific activities
intended to reduce GHG emissions in their operations and value chain or to otherwise support the transition.

Note: For readability, we removed footnote references from these excerpts. Please see the annex referenced below for more information.
Source: TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

16

Strategy b): Financial Impacts

The Task Force’s guidance for Strategy b) encourages companies to disclose the impacts of climaterelated risks and opportunities on financial performance and position, consistent with Strategy b)
In order to make more informed financial decisions, investors, lenders, and insurance underwriters need tounderstand how climate-related issues affect a company’s financial performance and position as reflected in its
income statement, cash flow statement, and balance sheet.
Category of Impact

Description of Impact

Impact on Financial
Performance

Changes to income and cash flow statements or other financial performance measures as a result ofclimate-related risks and opportunities may provide insight into management priorities and strategic
efforts. Impact on financial performance can include the following:• increases in revenue from new products or services from climate opportunities;• increases in cost due to carbon prices, business interruption, contingency, or repairs;• changes to operating cash flow from changes in upstream costs;• impairment charges due to assets exposed to transition risks; and• changes to total expected losses due to physical risks.

Impact on Financial
Position

Changes to the balance sheet statement as a result of climate-related risks and opportunities can include
the following:• changes to the carrying amount of assets due to exposure to physical and transition risks;• changes to the expected portfolio value given climate-related risks and opportunities; and• changes in liability and equity due to increases or decreases in assets (e.g., due to low-carbon capital
investments or to sale or write-offs of stranded assets)

Source: TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

17

Strategy b): Transition Plans

Describing plans for transitioning to a low-carbon economy is strongly encouraged for companies
that have made GHG emissions reduction commitments or operate in jurisdictions that have madesuch commitments, or have agreed to meet investor expectations regarding their GHG emissions
Definition and Importance of Transition Plans

Recommended Disclosure and Additional Guidance

A transition plan is an aspect of a company’s overall businessstrategy that lays out a set of targets and actions supporting
its transition toward a low-carbon economy, including
actions and commitments such as reducing its GHG
emissions.

As described in the guidance for Strategy b), plans fortransitioning to a low-carbon economy should be described by:Companies’ transition plans are of particular interest to
users, especially when they are seeking to verify thecredibility of companies’ commitments related to climatechange.

• companies that have made GHG emissions reduction
commitments,• companies that operate in jurisdictions that have madesuch commitments, and• companies who have agreed to meet investor expectations
regarding GHG emissions reductions

Users are particularly interested in information on how
companies will adjust their strategies or business models,
including the specific actions they will take to reduce risks
and increase opportunities as they transition to a lowcarbon economy.

The transition plan could include GHG emissions targets andspecific activities intended to reduce GHG emissions in thecompany’s operations and value chain or to otherwise support
the transition.

In 2021 the Task Force sought public comment on the
Proposed Guidance on Climate-related Metrics, Targets, andTransition Plans. The results of the consultation indicatedthat 96% of users responded that companies’ disclosure oftransition plans would be useful for decision-making.

The Guidance on Metrics, Targets, and Transition Plans,
published in 2021, provides additional guidelines on transition
plans.

Sources
TCFD, Guidance on Metrics, Targets, and Transition Plans, 2021
TCFD, Proposed Guidance on Metrics, Targets, and Transition Plans Consultation: Summary of Responses, October 14, 2021.
TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

18

Example of Disclosure for Strategy b)

Describe the impact of climate-related risks and opportunities on the company’s businesses,
strategy, and financial planning
Example Disclosure:
Ford (Transportation)
TCFD alignment: thefollowing example describes
the impact of climaterelated opportunities on
Ford’s strategy around useof alternative fuels,
electrification, operations
and supply chain. It
quantifies relevant
commitments and provides
specific details related to its
strategic planning andpartnerships.

Source: Ford, Integrated Sustainability and Financial Report 2021, March 2021, p. 12.
Note: : Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure.
They may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of
specific companies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

19

Example of Disclosure for Strategy b) (continued)

Describe the impact of climate-related risks and opportunities on the company’s businesses,
strategy, and financial planning
Example Disclosure:
Ford (Transportation)
TCFD alignment: thefollowing example describes
the impact of climaterelated opportunities on
Ford’s strategy around useof alternative fuels,
electrification, operations
and supply chain. It
quantifies relevant
commitments and provides
specific details related to its
strategic planning andpartnerships.

Source: Ford, Integrated Sustainability and Financial Report 2021, March 2021, p. 12.
Note: : Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure.
They may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of
specific companies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

20

Example of Disclosure for Strategy b): Financial Impacts

Describe the impact of climate-related issues on their financial performance (e.g., revenues, costs)
and financial position (e.g., assets, liabilities)
Example Disclosure:
Meridian Energy (Energy)
TCFD alignment: the following
example describes the top risks andpotential impact on the company’s
financial performance, from the longterm impact of extreme rainfall. The
type of climate-related risk, thetimeframe, the financial implications
and the quantification of the financial
impact are all mentioned.

Source: Meridian Energy, Climate Change Disclosures Meridian Energy Limited FY20, August 2020, p. 11.
Note: : Some content was reformatted in order to fit the page; and some content has been removed, denoted by […]. The examples included are not intended torepresent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure. They may not be applicable to all sectors andshould be considered within the framework of the sector in which the company operates. The mention of specific companies does not imply that they areendorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

21

Example for Strategy b): Plans for Transitioning

Companies that have made GHG emissions reduction commitments should describe their plans fortransitioning to a low-carbon economy
Example: Ørsted (Energy)
Key takeaways: the following example outlines thecompany’s description of its plans for transitioning
to a low-carbon economy, including decarbonizing
its energy generation and operations. It defines thesustainability challenge they are trying to address,
their approach, actions to become future-fit andprogress to date, as well as targets and indicators toquantify their results.

Source: Ørsted, 2020 Sustainability Report, 2021, p. 32.
Note: : Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure.
They may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

22

Strategy c)Strategy c) asks companies to disclose the resilience of their strategy, taking into considerationdifferent climate-related scenarios
Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the company’s businesses, strategy, andfinancial planning where such information is material.
All Sectors
Recommended
Disclosure c)
Describe theresilience of thecompany’s strategy,
taking into
considerationdifferent climaterelated scenarios,
including a 2°C or
lower scenario.

Companies should describe how resilient their strategies are to climate-related risks and opportunities, taking into
consideration a transition to a low-carbon economy consistent with a 2°C or lower scenario and, where relevant to thecompany, scenarios consistent with increased physical climate-related risks.
Companies should consider discussing: where they believe their strategies may be affected by climate-related risks and opportunities; how their strategies might change to address such potential risks and opportunities;
 the potential impact of climate-related issues on financial performance (e.g., revenues, costs) and financial
position (e.g., assets, liabilities); and the climate-related scenarios and associated time horizon(s) considered.
Companies should refer to Section D in the Task Force’s report for information on applying scenarios to forward-looking
analysis.

Note: For readability, we removed footnote references from these excerpts. Please see the annex referenced below for more information.
Source: TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

23

Strategy c): Scenario Analysis

Scenario analysis is a process for identifying and assessing a potential range of outcomes of future
events under conditions of uncertainty
What Is Scenario Analysis?

A useful tool for strategic and risk management decision-making under complex and
uncertain conditions

Scenarios are not exact predictions of the future, but descriptions of plausible events

They allow for a better understanding of the risks and uncertainties a company may faceunder different hypothetical futures, and how its performance might be affected

Climate-related scenario analysis allows a company to develop an understanding of how thephysical and transition climate-related risks and opportunities might plausibly impact thebusiness over time, and how such vulnerabilities are or should be addressed

Sources
TCFD, Recommendations of the Task Force on Climate-related Financial Disclosures, 2017
TCFD, Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities, 2017
TCFD, Guidance on Scenario Analysis for Non-Financial Companies , 202024

Strategy c): Using Scenario Analysis to Assess Resilience
Scenario analysis is useful for assessing the business implications of climate change
Scenario Analysis Contributes to Greater Strategy Resilience and Flexibility by:

Testing a
strategy andstrategy options
against a set of
scenarios

Identifying
possible future
threats oropportunities

Sources
TCFD, Recommendations of the Task Force on Climate-related Financial Disclosures, 2017
TCFD, Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities, 2017
TCFD, Guidance on Scenario Analysis for Non-Financial Companies , 2020

Identifying
signposts to set
contingency
plans in motion

Serving as abasis forcontinuous
monitoring andstrategy
adjustment

25

Strategy c): Disclosing Resilience Using Scenario Analysis
Using climate-related scenarios is subject to a few considerations

Disclosing Qualitative Versus Quantitative Climate-Related Scenario-Analysis
The Task Force believes that all organizations exposed to climate-related risks should consider:
1. using scenario analysis to help inform their strategic and financial planning processes and
2. disclosing how resilient their strategies are to a range of plausible climate-related scenarios.
The Task Force recognizes that, for many companies, scenario analysis is or would be a largely
qualitative exercise. Scenario quantification should be used if applicable and performed following
the qualitative narrative, which should serve as a robust framework and communication tool.
Companies with more significant exposure to transition risk (e.g., fossil fuel-based industries,
energy-intensive manufacturers, and transportation activities) and/or physical risk (e.g., agriculture,transportation and building infrastructure, insurance, and tourism) could undertake more rigorous
qualitative and, if relevant, quantitative scenario analysis with respect to key drivers and trends
that affect their operations. They could also consider disclosing key assumptions and pathways
related to the scenarios they use to allow users to understand the analytical process and its
limitations.

Sources
TCFD, Recommendations of the Task Force on Climate-related Financial Disclosures, 2017
TCFD, Guidance on Scenario Analysis for Non-Financial Companies , 202026

Strategy c): Disclosing Resilience Using Scenario Analysis (cont.)
Using climate-related scenarios is subject to a few considerations
Materiality and Location of Disclosure
In the case of disclosures around strategy and forward-looking scenarios, companies should disclosematerial information in financial filings.
To the extent that additional detail and discussion of scenarios and strategy is warranted, which may
not rise to the level of the financial filings, companies should consider disclosing additional detail inother public reports, such as sustainability and non-financial reports, with appropriate crossreferences to alert investors to such information.
The Task Force also encourages certain companies—those in the four non-financial groups that havemore than one billion U.S. dollar equivalent (USDE) in annual revenue—to disclose the resiliency of
their strategies regardless of materiality in other reports1, if not included in their financial fillings.

1. Other reports include official company reports that are issued at least annually, widely distributed and available to investors and others, and subject tointernal governance processes that are the same or substantially similar to those used for financial reporting
Sources
TCFD, Guidance on Scenario Analysis for Non-Financial Companies , 2020
TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

27

Strategy c): Using Scenario Analysis

Companies generally undertake certain steps and consider certain factors when performing
scenario analysis
Illustrative Scenario Development Process

Key Success Factors

1.

Effective organizational approach

2.
3.

4.

5.

6.

Engage stakeholders

Define the problem
Assess the context and identify the driving
forces and uncertainties
Understand and describe the scenario
outcome and pathways
Write qualitative scenario narratives andquantify (if applicable)
Check quality•

Obtain board and senior management support•

Engage internal stakeholders to promotecompany-wide ownership and involvement•

Develop well-defined governance roles andclear reporting relationships to senior levels

Allocating the adequate resources (e.g., devoting
enough time to scenario analysis)Using the relevant data (e.g., at the right scale andlevel of granularity, backed by scientific research)
Ensuring credibility and relevancy (e.g., quality
assurance process, process to periodically update
scenarios)

Sources
TCFD, Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities, 2017
TCFD, Guidance on Scenario Analysis for Non-Financial Companies , 202028

Strategy c): Example of Climate-Related Scenarios

The Network for Greening the Financial System (NGFS) provides useful climate-related scenarios
examples to get started on scenario analysis• Hot house world scenarios assume that some climate
policies are implemented in some jurisdictions, but
global efforts are insufficient to halt significant global
warming. Critical temperature thresholds are exceededleading to severe physical risks and irreversible impacts
like sea-level rise.
• Too little, too late it is possible that a late transition
would fail to contain physical risks. While no scenarios
have been specifically designed for this purpose, thisspace can be explored by assuming higher physical risk
outcomes for the disorderly scenarios.

Disorderly

Too little, too late

Orderly

Hot house worldTransition risks• Disorderly scenarios explore higher transition risk due
to policies being delayed or divergent across countries
and sectors. Carbon prices are typically higher for agiven temperature outcome.

Low• Orderly scenarios assume climate policies are
introduced early and become gradually more stringent.
Both physical and transition risks are relatively subdued.

High

NGFS Scenarios

Low

Physical risks

High

Source: NGFS, NGFS Scenarios Portal

29

Strategy c): Concerns about Disclosing Confidential Information

The Task Force has heard from preparers over the years that one of the top concerns related to theStrategy recommendation is disclosing scenario analysis assumptions, as such assumptions may
include confidential business information
Companies’ concern about disclosing certain confidential information related to their scenario analysis
assumptions or resilience of their strategies was addressed in the 2020 status report.1
When evaluating whether particular aspects of a company’s intended disclosure around scenario analysis
assumptions or the resilience of its strategy contain confidential business information, the company should
consider the following:• whether the information provides the company with an economic benefit that translates into a competitive
advantage because the information is unknown to its competitors• whether making such information public may cause a considerable economic loss for the company.

In situations where a company is not certain information related to its scenario analysis assumptions or the
resilience of its strategy contains confidential business information, the Task Force encourages the company toconsider a stepwise approach to disclosure — rather than decide not to disclose. For example, a company mightstart by disclosing broader, qualitative information and move to more specific, quantitative data and information
over time.
1. This topic was also covered in the Guidance on Scenario Analysis for Non-Financial Companies
Sources
TCFD, 2019 Status Report, 2019, p.49.
TCFD, 2020 Status Report, 2020
TCFD, Guidance on Scenario Analysis for Non-Financial Companies, 202030

Example of Disclosure for Strategy c): Scenario Analysis

Describe the resilience of the company’s strategy, taking into consideration different climaterelated scenarios, including a 2°C or lower scenario
Example Disclosure: Hitachi(Technology)
TCFD alignment: thefollowing example highlights
the selected businesses thathave a relatively highlikelihood of being affected byclimate change andqualitatively examines thebusiness impact of, andresponses to 1.5°C and 4°C
scenarios, in terms of climaterelated risks andopportunities.

[…]

Source: Hitachi, Hitachi Sustainability Report 2021, September 29, 2021, pp. 51 – 52.
Note: Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure. They
may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

31

Example of Disclosure for Strategy c): Scenario Analysis (continued)
Describe the resilience of the company’s strategy, taking into consideration different climaterelated scenarios, including a 2°C or lower scenario
Example Disclosure: Allianz(Insurance Companies, Asset Managers)
TCFD alignment: the following example
highlights the impact of two transition risk
scenarios — both 2°C or lower — on the risk
exposure (i.e., resilience) of Allianz’s strategy. Itshows various time horizons, asset types, risk
levels, and factors that may enhance or mitigate
potential risk exposures in order to increase
resilience (e.g., policy, technology substitutions,and other market forces).

Source: Allianz Group, Sustainability Report 2020, April 29, 2021, p. 86
Note: Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure. They
may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

32

Example of Disclosure for Strategy c): Financial Impacts

Describe the potential impact of climate-related issues on financial performance (e.g., revenues,
costs) and financial position (e.g., assets, liabilities)
Example Disclosure: BHP (Energy)
TCFD alignment: the following examples
illustrate BHP’s portfolio assessment under
different climate scenarios, specifically the
cumulative demand predicted in the next
30 years for some of the commodities they
provide, as well as the rolling present
value of unlevered free cash flows relative
to their Central Energy View over time.
BHP considered four scenarios in theiranalysis: 1.5°C scenario (aligned with thegoals of the Paris Agreement), Central
Energy View (3°C increase by 2100), Lower
Carbon View: (2.5°C increase by 2100),and Climate Crisis scenario. BHP’s portfolio
analysis demonstrates the resilience of
their strategies to climate-related risks andopportunities, taking into consideration atransition to a low-carbon economy
consistent with a 2°C or lower scenario, as
it may present greater upside to theircurrent portfolio and create additional
opportunities for growth in future-facing
commodities.
Source: BHP, Climate Change Report 2020, September 2020, pp. 19 – 21.
Note: : Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure.
They may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

33

Example of Disclosure for Strategy c): Financial Impacts (continued)

Describe the potential impact of climate-related issues on financial performance (e.g., revenues,
costs) and financial position (e.g., assets, liabilities)
Example Disclosure: BHP (Energy)
TCFD alignment: the following examples
illustrate BHP’s portfolio assessment under
different climate scenarios, specifically the
cumulative demand predicted in the next
30 years for some of the commodities they
provide, as well as the rolling present
value of unlevered free cash flows relative
to their Central Energy View over time.
BHP considered four scenarios in theiranalysis: 1.5°C scenario (aligned with thegoals of the Paris Agreement), Central
Energy View (3°C increase by 2100), Lower
Carbon View: (2.5°C increase by 2100),and Climate Crisis scenario. BHP’s portfolio
analysis demonstrates the resilience of
their strategies to climate-related risks andopportunities, taking into consideration atransition to a low-carbon economy
consistent with a 2°C or lower scenario, as
it may present greater upside to theircurrent portfolio and create additional
opportunities for growth in future-facing
commodities.
Source: BHP, Climate Change Report 2020, September 2020, pp. 19 – 21.
Note: : Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure.
They may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

34

Discussion questions• Does your company disclose climate-relatedrisks or opportunities?
• Has your organization considered theresilience of its strategy under different
climate-related scenarios?

35Additional Resources

Other resources on how to get started can be found on the TCFD website and the Knowledge Hub
TCFD Website

Knowledge Hub

Find all the information you need about the TCFD on
its official website, including the recommendations
and all other publications.

Find additional TCFD-related resources curated by the
CDSB (information on the recommendations,alignment with other frameworks, online courses, etc).

https://www.fsb-tcfd.org/

https://www.tcfdhub.org/

36

TCFD Series of Workshops

The next session will focus on the Risk Management recommendation
Session1

Fundamentals and Overview of TCFD

2

TCFD Recommendation:
Governance3

TCFD Recommendation:
Strategy

4

TCFD Recommendation:
Risk Management

5

TCFD Recommendation:
Metrics & Targets

Next session

37

Q&A

38

Appendix: Supplemental guidance forthe financial sector and non-financialgroups39

Overview of the Supplemental Guidance

The Task Force identified certain areas where supplemental guidance was warranted, for both thefinancial sectors and non-financial groups
Financial Sector

Non-Financial Groups

The supplemental guidance is intended to provide
additional context for the financial sector when
preparing disclosures consistent with the Task Force’s
recommendations, namely for the following four
major industries:– Banks– Insurance Companies– Asset Owners– Asset Managers

Similarly, supplemental guidance is included forcompanies within four non-financial groups. These
groups comprise industries in the following fourareas:– Energy– Transportation– Materials and Buildings– Agriculture, Food, and Forest Products

Source: TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

40

Supplemental Strategy Guidance for the Financial Sector
Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the company’s businesses, strategy, andfinancial planning where such information is material.
Banks
Recommended disclosure a)
Describe the climate-relatedrisks and opportunities thecompany has identified overthe short, medium, and longterm

Banks should describe significant concentrations of credit exposure to carbon-related assets. Additionally,banks should consider disclosing their climate-related risks (transition and physical) in their lending and otherfinancial intermediary business activities

Insurance Companies
Recommended disclosure b)
Describe the impact ofclimate-related risks andopportunities on thecompany’s businesses,
strategy, and financial
planning

Insurance companies should describe the potential impacts of climate-related risks and opportunities as wellas provide supporting quantitative information where available, on their core businesses, products, andservices, including: information at the business division, sector, or geography levels; how the potential impacts influence client or broker selection; and whether specific climate-related products or competencies are under development, such as insurance ofgreen infrastructure, specialty climate-related risk advisory services, and climate-related client
engagement.

Recommended disclosure c)
Describe the resilience of thecompany’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower
scenario.

Insurance companies that perform climate-related scenario analysis on their underwriting activities should
provide the following information:
 description of the climate-related scenarios used, including the critical input parameters, assumptions
and considerations, and analytical choices. In addition to a 2°C scenario, insurance companies with
substantial exposure to weather-related perils should consider using a greater than 2°C scenario toaccount for physical effects of climate change and time frames used for the climate-related scenarios, including short, medium-, and long-term milestones.

Note: For readability, we removed footnote references from these excerpts. Please see the annex referenced below for more information.
Source: TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

41

Supplemental Strategy Guidance for the Financial Sector (cont.)
Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the company’s businesses, strategy, andfinancial planning where such information is material.
Asset Owners
Recommended disclosure b)
Describe the impact ofclimate-related risks andopportunities on thecompany’s businesses,
strategy, and financial
planning

Asset owners should describe how climate-related risks and opportunities are factored into relevant
investment strategies. This could be described from the perspective of the total fund or investment strategy orindividual investment strategies for various asset classes.

Recommended disclosure c)
Describe the resilience of thecompany’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower
scenario.

Asset owners that perform scenario analysis should consider providing a discussion of how climate-related
scenarios are used, such as to inform investments in specific assets.

Asset Managers
Recommended disclosure b)
Describe the impact ofclimate-related risks andopportunities on thecompany’s businesses,
strategy, and financial
planning

Asset managers should describe how climate-related risks and opportunities are factored into relevant
products or investment strategies. Asset managers should also describe how each product or investment
strategy might be affected by the transition to a low-carbon economy.

Source: TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

42

Supplemental Guidance for the Non-Financial Groups
Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the company’s businesses, strategy, andfinancial planning where such information is material.
Energy, Transportation, Materials & Buildings, and Agriculture, Food, and Forest Products
Recommended
disclosure b)
Describe theimpact of climaterelated risks andopportunities on
the company’sbusinesses,
strategy, andfinancial planning

Companies should consider discussing how climate-related risks and opportunities are integrated into their (1) current
decision-making and (2) strategy formulation, including planning assumptions and objectives around climate change
mitigation, adaptation, or opportunities such as: Research and development (R&D) and adoption of new technology.
 Existing and committed future activities such as investments, restructuring, write-downs, or impairment of assets.
 Critical planning assumptions around legacy assets, for example, strategies to lower carbon-, energy-, and/or waterintensive operations.
 How GHG emissions, energy, and water and other physical risk exposures, if applicable, are considered in capital planningand allocation; this could include a discussion of major acquisitions and divestments, joint-ventures, and investments intechnology, innovation, and new business areas in light of changing climate-related risks and opportunities.
 The company’s flexibility in positioning/repositioning capital to address emerging climate-related risks andopportunities.

Recommended
disclosure c)
Describe theresilience of thecompany’s
strategy, taking
into considerationdifferent climaterelated scenarios,
including a 2°C or
lower scenario.

Companies with more than one billion U.S. dollar equivalent (USDE) in annual revenue should consider conducting more robust
scenario analysis to assess the resilience of their strategies against a range of climate-related scenarios, including a 2°C or
lower scenario and, where relevant to the company, scenarios consistent with increased physical climate-related risks.
Companies should consider discussing the implications of different policy assumptions, macro-economic trends, energy
pathways, and technology assumptions used in publicly available climate-related scenarios to assess the resilience of theirstrategies.
For the climate-related scenarios used, companies should consider providing information on the following factors to allow
investors and others to understand how conclusions were drawn from scenario analysis:
Critical input parameters, assumptions, and analytical choices for the climate-related scenarios used, particularly as they relate
to key areas such as policy assumptions, energy deployment pathways, technology pathways, and related timing assumptions.
 Potential qualitative or quantitative financial implications of the climate-related scenarios, if any.

Note: For readability, we removed footnote references from these excerpts. Please see the annex referenced below for more information.
Source: TCFD, Annex : Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures , 2021

43