2019 Status Report

Task Force on
Climate-related
Financial Disclosures:
Status Report

June 2019

The Task Force on Climate-related Financial DisclosuresiMay 31, 2019

Letter from Michael R. Bloomberg
Mr. Randal Quarles
Chair
Financial Stability Board
Bank for International Settlements
Centralbahnplatz 2
CH-4002 Basel
Switzerland

Dear Chair Quarles,
It is my pleasure to present the second status report of the Task Force on Climate-related Financial
Disclosures (TCFD). This report focuses on the continued progress of companies in disclosing information on
climate-related risks and opportunities since the release of the final TCFD recommendations in June 2017.
Increasingly, we see evidence and acknowledgement that climate change presents financial risk to the global
economy. According to the United Nations, delays in tackling this issue could cost companies nearly $1.2
trillion over the next 15 years.
The relevance of climate-related risks to today’s financial decisions and the need for greater transparency
have only become clearer and more urgent over the past two years. Nearly 800 public- and private-sector
organizations have announced their support for the TCFD and its work, including global financial firms
responsible for assets in excess of $118 trillion.
I applaud the recent acknowledgement from the Network for Greening the Financial System (NGFS), a groupof 36 central banks and supervisors, that “climate-related risks are a source of financial risk [and it] falls
squarely within the mandates of central banks and supervisors to ensure the financial system is resilient tothese risks.” As one of their six key recommendations to foster a resilient financial system, the NGFS
highlighted the importance of disclosure and encouraged companies to disclose in line with the TCFD
recommendations.
In this report, the Task Force finds that important progress is being made. Our review of over 1,000
companies showed that, for some recommended disclosures, the percentage of companies disclosing
information increased up to nearly 15% over a two-year period. The results of our survey indicate that many
companies are putting significant thought and effort into implementing the recommendations, and that many
investors have seen this work pay off in the form of increases in the availability and quality of disclosure.
However, progress must be accelerated. Today’s disclosures remain far from the scale the markets need tochannel investment to sustainable and resilient solutions, opportunities, and business models. I believe in the
power of transparency to spur action on climate change through market forces.
The Task Force remains committed to market transparency and stability. Over the next year we look forward
to continuing to encourage and facilitate implementation of the TCFD recommendations, to making further
progress on this critical work, and to providing you with a third status report next year. Thank you for yoursupport of the Task Force.
Sincerely,

Michael Bloomberg

The Task Force on Climate-related Financial DisclosuresiExecutive Summary
In June 2017, The Task Force on Climate-related Financial Disclosures (Task Force or TCFD)
released its final recommendations (2017 report), which provide a framework for companies andother organizations to develop more effective climate-related financial disclosures through their
existing reporting processes.1 In its 2017 report, the Task Force emphasized the importance oftransparency in pricing risk—including risk related to climate change—to support informed,
efficient capital-allocation decisions.2 The large-scale and complex nature of climate change
makes it uniquely challenging, especially in the context of economic decision making.
Furthermore, many companies incorrectly view the implications of climate change to be relevant
only in the long term and, therefore, not necessarily relevant to decisions made today. Those
views, however, have begun to change.3

A Call to Action
Based on a recent report issued by the Intergovernmental Panel on Climate Change, a global
group of climate scientists convened by the United Nations, urgent and unprecedented changes
are needed to meet the goals of the Paris Agreement. 4,5 The report warns limiting the global
average temperature to a maximum of 1.5°C “require[s] rapid and far-reaching transitions inenergy, land, urban and infrastructure [systems] (including transport and buildings), andindustrial systems.” In fact, according to a recent United Nations Environment Programme reporton emissions, global greenhouse gas emissions have to peak by 2020 and decline rapidly
thereafter to limit the increase in the global average temperature to no more than 1.5°C above
pre-industrial levels.6 However, based on current policies and commitments, “global emissions are
not even estimated to peak by 2030—let alone by 2020.” As a result, governments and privatesector entities are considering a range of options for reducing global emissions, which could
result in disruptive changes across economic sectors and regions in the near term.

Limiting the global average temperature requires “rapid and far-reachingtransitions in land, energy, industry, buildings, transport, and cities.”7
Figure E1 (p. iii) illustrates the level of impact and risk on people, economies, and ecosystems
associated with global average temperature increases. Importantly, four of the five categories ofrisk have increased since 2014 “based on multiple lines of evidence.”8 Now more than ever it iscritical for companies to consider the impact of climate change and associated mitigation andadaptation efforts on their strategies and operations and disclose related material information.
Companies that invest in activities that may not be viable in the longer term may be less resilient
to risks related to climate change; and their investors may experience lower financial returns.

1

In this report, 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 public- and private-sector pension plans, endowments, and foundations.
2
In December 2015, the Financial Stability Board established the Task Force on Climate-related Financial Disclosures to develop voluntary,consistent climate-related financial disclosures that would be useful in understanding material risks related to climate change.
3
For example, rising global average temperatures are increasing the frequency and severity of extreme weather events, with combined
insured losses related to natural catastrophes of $219 billion in 2017 and 2018, the highest ever for a two-year period (Swiss Re Institute,
Natural catastrophes and man-made disasters in 2018: “secondary” perils on the frontline, April 10, 2019.).
4Intergovernmental Panel on Climate Change, Summary for Policymakers: Global Warming of 1.5°C., October 2018.
5
United Nations Framework Convention on Climate Change, ”The Paris Agreement,” December 2015. Under the Paris Agreement, nearly 200
governments have agreed to strengthen the response to the threat of climate change by “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”6
United Nations Environment Programme, The Emissions Gap Report 2018, November 2018.
7
Intergovernmental Panel on Climate Change, “Press Release: Summary for Policymakers: Global Warming of 1.5°C,” October 8, 2018.
8
Ibid and Intergovernmental Panel on Climate Change, Fifth Assessment Report, Cambridge University Press, 2014.

The Task Force on Climate-related Financial DisclosuresiiCompounding the effect on longer-term returns is the risk that present valuations do notadequately factor in climate-related risks because of insufficient information. As such, investors
need better information on how companies—across a wide range of sectors—have prepared orare preparing for a lower-carbon economy; and those companies that meet this need may have acompetitive advantage over others.

Figure E1

Global mean temperature change
relative to pre-industrial levels

Level of Impact and Risk Associated with Temperature Increases

Very High

2.0°C
High

1.5°C

1.0°C

0°C

Moderate

Undetectable
Unique andthreatenedsystems

Extreme weather
eventsDistributionof impacts

Global aggregate
impacts

Large scale
singular events

Legend: Level ofadditional impact or risk
due to climate change

Confidence level : L=Low, M=Medium, H=High and VH=Very high2005-2016

See Intergovernmental Panel on Climate Change, Summary for Policymakers: Global Warming of 1.5°C for more information,
including definitions of terms used.

In addition, there is a growing demand for decision-useful, climate-related financial information
by investors. There are likely many factors driving investor demand, ranging from European
regulations requiring certain investors to disclose climate-related information to weather-driven
events resulting in significant financial impacts and leading investors to seek better informationon their exposure to climate-related risks.9 As evidence of this demand, more than 340 investors
with nearly $34 trillion in assets under management have committed to engage the world’s
largest corporate greenhouse gas emitters to strengthen their climate-related disclosures byimplementing the TCFD recommendations as part of Climate Action 100+.10
There is also growing interest in climate-related financial disclosures by financial regulators. In
April, the Network for Greening the Financial System (NGFS)—comprised of 36 central banks andsupervisors and six observers, representing five continents—issued six recommendations aimed
at facilitating the role of the financial sector in achieving the objectives of the Paris Agreement.
One of the recommendations is to achieve robust and internationally consistent climate andenvironment-related disclosure; and the NGFS “encourages all companies issuing public debt orequity as well as financial sector institutions to disclose in line with the TCFD recommendations.”11

9For example, see France’s Article 173-VI of the Law on Energy Transition for Green Growth, EU Directive on the activities and supervision of
institutions for occupational retirement provision, and the United Kingdom’s Clarifying and strengthening trustees’ investment duties.

10

See Climate Action 100+.

11

NGFS, A call for action: Climate change as a source of financial risk, April 17, 2019.

The Task Force on Climate-related Financial Disclosuresiii

Climate-Related Financial Disclosure Practices
As part of its efforts to promote adoption of the recommendations, the Task Force prepared thisstatus report to provide an overview of current disclosure practices as they relate to the Task
Force’s recommendations, highlight key challenges associated with implementing therecommendations, and outline some of the efforts the Task Force will consider undertaking incoming months to help address some of the implementation challenges.
To better understand current climate-related financial disclosure practices and how they have
evolved, the Task Force reviewed—using artificial intelligence technology—reports for over 1,000
large companies in multiple sectors and regions over a three-year period. In addition, the Task
Force conducted a survey on companies’ efforts to implement the TCFD recommendations as wellas users’ views on the usefulness of climate-related financial disclosures for decision-making.
While the Task Force found some of the results of its disclosure review and survey encouraging, it
is concerned that not enough companies are disclosing decision-useful climate-related financial
information. This could be problematic for financial markets if market participants do not havesufficient information about the potential financial impact of climate-related issues on companies.
Table E1 summarizes the key themes and findings from the Task Force’s disclosure review andsurvey results.
Table E1

Key Themes and Findings
Disclosure of climate-related financial information has increased since2016, but is still insufficient for investors. Based on the TCFD survey, the artificial
intelligence review, and input from external initiatives, the Task Force sees progress being
made to improve the availability and quality of climate-related financial information.
However, given the speed at which changes are needed to limit the rise in the global
average temperature—across a wide range of sectors—more companies need to consider
the potential impact of climate change and disclose material findings.

More clarity is needed on the potential financial impact of climate-related
issues on companies. The top area identified by users of climate-related financial
disclosures as needing improvement is for companies to provide more clarity on thepotential financial impact of climate-related issues on their businesses. Without suchinformation, users may not have the information they need to make informed financial
decisions.

Of companies using scenarios, the majority do not disclose information on
the resilience of their strategies. Three out of five companies responding to the
TCFD survey that view climate-related risk as material and use scenario analysis to assess
the resilience of their strategies do not disclose information on the resilience of theirstrategies. This is an important gap in disclosure for companies with material climaterelated risks, but it is consistent with the Task Force’s understanding from discussions withvarious companies, industry associations, and other groups that companies are still earlyin the process of using climate-related scenarios internally, evolving their approaches, andlearning how to integrate scenarios into corporate strategy formulation processes.

Mainstreaming climate-related issues requires the involvement of multiple
functions. While sustainability and corporate responsibility functions are the primary
drivers of TCFD implementation efforts, risk management, finance, and executive
management are increasingly involved as well. The Task Force believes involvement ofmultiple functions is critical to mainstreaming climate-related issues, especially the
involvement of the risk management and finance functions.

In addition, Figure E2 (p. vi) provides a summary of additional themes and findings from thisreport, and Section A.2. Purpose of Report provides an overview of the report’s major sections.

The Task Force on Climate-related Financial Disclosuresiv

Overall, the Task Force found signs of progress in implementing the recommendations among
companies traditionally engaged on climate-related issues. These companies demonstrate that
disclosing climate-related information consistent with the TCFD recommendations is possible andis a journey of continuing improvement. Given the urgent and unprecedented changes needed tomeet the goals of the Paris Agreement, the Task Force is concerned that not enough companies
are disclosing information about their climate-related risks and opportunities.
The Task Force strongly encourages more companies to use its recommendations as a framework
for reporting on climate-related risks and opportunities, especially companies with material
climate-related risks. Companies in early stages of evaluating the impact of climate change on
their businesses and strategies and those that have determined climate-related issues are notmaterial are encouraged to disclose information on their governance and risk management
practices.12 To accelerate the disclosure of consistent, comparable, reliable, and clear climaterelated financial information, the Task Force encourages investors and other users of suchinformation to engage with companies on the specific types of information that are most usefulfor decision making.
The Task Force has often highlighted that implementation of its recommendations would be ajourney, and it applauds those who have started down the path. The Task Force urges thosecompanies to continually improve the quality and usefulness of their climate-related financial
disclosures. For those companies that are “piloting” reporting internally, it is time to begin
disclosing; and for those who have not started, now is the time.

Next Steps
The Task Force believes its climate-related financial disclosures review and survey results
highlight the need for continued efforts to support implementation of the recommendations,especially in terms of companies using scenario analysis to assess the resilience of their strategies
under a range of plausible future climate states. As such, over the next several months, the Task
Force will continue to promote and monitor adoption of its recommendations and will prepare
another status report for the Financial Stability Board in September 2020. In addition, the Task
Force is considering additional work in the following areas:Clarifying elements of the Task Force’s supplemental guidance contained in the annex to its
2017 report (Implementing the Recommendations of the TCFD),
Developing process guidance around how to introduce and conduct climate-related scenario
analysis, andIdentifying business-relevant and accessible climate-related scenarios.

The Task Force believes the success of its recommendations depends on continued, widespread
adoption by companies in the financial and non-financial sectors. Through widespread adoption,
climate-related risks and opportunities will become a natural part of companies’ risk management
and strategic planning processes. As this occurs, companies’ and investors’ understanding of thefinancial implications associated with climate change will grow, information will become more
useful for decision making, and risks and opportunities will be more accurately priced, allowing
for the more efficient allocation of capital and contributing to a more orderly transition to a lowcarbon economy.

12

The Task Force understands many investors want insight into the governance and risk management context in which companies' financial
and operating results are achieved. The Task Force believes disclosures that follow its Governance and Risk Management recommendations
directly address this need for context.

The Task Force on Climate-related Financial Disclosuresv

Figure E2

2019 TCFD Status Report: Additional Themes and Findings
Support for the TCFD Continues to Grow

36

340
investors withnearly $34 trillion in
AUM are asking
companies toreport under TCFD

785
companies and otherorganizations committed
to support TCFD

180

out of 198 preparer
survey respondents
have decided to
implement TCFD

Non-

297 financial 114 Other

374 Financial

central banks/supervisors
encourage TCFD
reportinggovernments

5 support TCFD:

Belgium, Canada,
France, Sweden,
and the UK

Implementing the TCFD Recommendations is a Journey
Based on an AI review of reports for over

1,100

Top Survey Findings for Preparers

companies, disclosure of climate-related financial

Have decided to “fully” or “partially”
implement the recommendations

information is growing, but not fast enough.

Plan to complete
implementation
within three years

Number of recommended
disclosures addressed91%

11 11 1129%

5 5
3.13.6 3.6
2.83.13.6
2.82.83.1

67%
60%

5

Consider climaterelated issues to bematerial today or in
next 1-2 years

2016
2017
2017
2018
2018
Goal
Goal
GoalGoal
20162016
2017
2018
Goal
Goal
average number
per company

no material with material
climate risk climate risk

Top Survey Findings for Users and Other Respondents
The TCFD survey received

485 responses, including

198 from companies preparing disclosures. Preparers

Cited an increase in the availability of climaterelated financial disclosures

85% 76%

identified several challenges in implementing TCFD:

Climate is embedded in processes and ischallenging to discuss separately in disclosures

49%

Disclosing assumptions is difficult because they
include confidential business information

46%

There is a lack of standardized metrics for ourindustry42%

75%

Use climaterelated financial
disclosures indecision making
processes

Cited improvementsin the quality of
disclosures

The Task Force Continues to Support the Implementation Journey
The Task Force is considering additional work in the areas described below and possibly in other areas in the
coming months.
Clarifying elements of the Task Force’s
supplemental guidance contained in theannex to its 2017 report
Developing process guidance around how to
introduce and conduct climate-related
scenario analysis

The Task Force on Climate-related Financial Disclosures

Identifying business-relevant and accessible
climate-related scenarios

Developing a third TCFD status report(September 2020)vi

Contents
Letter from Michael R. Bloomberg.............................................................................................. i
Executive Summary ..................................................................................................................... ii
A. Introduction .............................................................................................................................. 1
1.

Background on the Task Force ..................................................................................................... 1

2.

Purpose of Report .......................................................................................................................... 4

B. State of Climate-Related Financial Disclosures .................................................................... 6
1.

Scope and Approach ...................................................................................................................... 62.

Key Takeaways................................................................................................................................ 7

3.

Climate-Related Financial Disclosures for Select Industries 2016-2018 ................................ 11

4.

TCFD-Aligned Reporting by Asset Managers and Asset Owners ............................................ 41

C. Adoption and Use of the TCFD Recommendations .......................................................... 49
1.

Scope and Approach .................................................................................................................... 49

2.

Overview of Results ..................................................................................................................... 51

3.

Preparer Perspectives ................................................................................................................. 52

4.

User Perspectives ......................................................................................................................... 57

5.

Conclusion..................................................................................................................................... 60

D. Disclosure of Strategy Resilience Using Scenario Analysis .............................................. 62
1.

Background ................................................................................................................................... 62

2.

Results from the TCFD Survey .................................................................................................... 63

3.

Challenges Related to the Use of Climate-Related Scenario Analysis ................................... 64

4.

Selected Companies’ Use of Scenario Analysis......................................................................... 67

5.

Conclusion..................................................................................................................................... 74

E. User Perspectives on Decision-Useful Climate-Related Financial Disclosures .............. 76
1.

Buy Side Analyst’s Perspective on a Materials Company ........................................................ 76

2.

Buy Side Analyst’s Perspective on an Electric Utility Company .............................................. 80

3.

Portfolio Manager’s Perspective on a Utilities Company ........................................................ 83

4.

Credit Analyst’s Perspective on an Oil and Gas Company ...................................................... 87

5.

Buy Side Analyst’s Perspective on a Technology Company .................................................... 91

6.

Buy Side Analyst's Perspective on an Integrated Oil and Gas Company ............................... 97

7.

Buy Side Analyst's Perspective on a Technology Company .................................................. 103

F. Initiatives Supporting TCFD ................................................................................................. 110
1.

Implementation Initiatives ........................................................................................................ 110

2.

Alignment of Reporting Frameworks ....................................................................................... 112

3.

Government and Regulatory Efforts ........................................................................................ 113

4.

Initiatives Related to Scenario Analysis ................................................................................... 116

Appendix 1: Task Force Members .......................................................................................... 118
Appendix 2: Disclosure Selection and Review Methodology ............................................. 120
Appendix 3: Glossary and Abbreviations .............................................................................. 124
Appendix 4: References ........................................................................................................... 127

The Task Force on Climate-related Financial Disclosuresvii

A Introduction

The Task Force on Climate-related Financial Disclosures

8

A. Introduction
1. Background on the Task ForceIn April 2015, the G20 Finance Ministers and Central Bank Governors asked the Financial Stability
Board to convene public- and private-sector participants and review how the financial sector cantake account of climate-related issues.13 As part of its review, the Financial Stability Board
identified the need for better information to support informed investment, lending, andinsurance underwriting decisions and improve understanding and analysis of climate-relatedrisks. To help identify the information needed by investors, lenders, and insurance underwriters
to appropriately assess and price climate-related risks and opportunities, the Financial Stability
Board established an industry-led task force: the Task Force on Climate-related Financial
Disclosures (Task Force or TCFD).14 The Task Force was asked to develop voluntary, consistentclimate-related financial disclosures that would be useful to investors, lenders, and insurance
underwriters in understanding material risks. The 29-member Task Force is global; and its
members were selected by the Financial Stability Board and come from various organizations,
including large banks, insurance companies, asset managers, pension funds, large non-financial
companies, accounting and consulting firms, and credit rating agencies. See Appendix 1 for a listof current Task Force members.

A
Introduction

The Task Force’s Recommendations
On June 29, 2017, the Task Force released
Figure 1
its Final Report: Recommendations of the
Key Features of Recommendations
Task Force on Climate-related Financial
Disclosures (2017 report). The report is Adoptable by all organizations
centered on four widely adoptable Designed to solicit decision-useful, forwardrecommendations on climate-related
looking information on potential financial
impacts of climate change
financial disclosures that are applicable toboth non-financial and financial companies
 Brings the “future” nature of climate-related
across industries and jurisdictions
issues into the present through scenario
analysis(Figure 1). Importantly, the Task Forcebelieves asset managers and asset owners
 Strong focus on risks and opportunities relatedshould implement the recommendations.
to the transition to a lower-carbon economy
Large asset owners and asset managers sitat the top of the investment chain and, therefore, have an important role to play in influencing
the companies in which they invest to provide better climate-related financial disclosures.

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

The Task Force structured its recommendations around four thematic areas that represent coreelements of how companies operate: governance, strategy, risk management, and metrics andtargets. The four overarching recommendations are supported by 11 recommended disclosuresthat build out the framework with information that will help investors and others understand howreporting companies assess climate-related risks and opportunities (Figure 2, p. 2). In addition,
there is guidance to support all companies in developing climate-related financial disclosuresconsistent with the recommendations and recommended disclosures. For the financial sector andcertain non-financial sectors, supplemental guidance was developed to highlight important sectorspecific considerations and provide a fuller picture of potential climate-related financial impacts in
those sectors. The Task Force’s guidance and supplemental guidance is included in Implementing
the Recommendations of the Task Force on Climate-related Financial Disclosures (Annex).

Appendices

13
14“Communiqué from the G20 Finance Ministers and Central Bank Governors Meeting in Washington, D.C. April 16-17, 2015,” April 2015.
FSB, “FSB to establish Task Force on Climate-related Financial Disclosures,” December 4, 2015.

The Task Force on Climate-related Financial Disclosures1

Figure 2

Recommendations and Supporting Recommended Disclosures

Governance

Strategy

Risk Management

Metrics and Targets

Disclose the organization’s
governance around climaterelated risks and opportunities.

Disclose the actual and potential
impacts of climate-related risks
and opportunities on theorganization’s businesses,
strategy, and financial planningwhere such information ismaterial.

Disclose how the organization
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.

a) Describe the board’s oversightof climate-related risks andopportunities.

a) Describe the climate-relatedrisks and opportunities theorganization has identified overthe short, medium, and longterm.

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

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

b) Describe management’s role inassessing and managing
climate-related risks andopportunities.

b) Describe the impact of climaterelated risks and opportunities
on the organization’s
businesses, strategy, andfinancial planning.

b) Describe the organization’s
processes for managing
climate-related risks.

b) Disclose Scope 1, Scope 2, and,if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the related risks.

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

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

c) Describe the targets used by
the organization to manage
climate-related risks andopportunities and performanceagainst targets.

The Task Force on Climate-related Financial Disclosures2

Disclosure in Mainstream Financial Filings
The Task Force recommends that preparers of climate-related financial disclosures provide suchdisclosures in their mainstream (i.e., public) annual financial filings.15 In most G20 jurisdictions,companies with public debt or equity have a legal obligation to disclose material information in
their financial filings—including material climate-related information. The Task Force believes
climate-related issues are or could be material for many companies, and its recommendations
should be useful to companies in complying more effectively with existing disclosure obligations.
Importantly, companies should make financial disclosures in accordance with their national
disclosure requirements. If certain elements of the recommendations are incompatible withnational disclosure requirements for financial filings, the Task Force encourages companies todisclose those elements in other official company reports that are issued at least annually, widelydistributed and available to investors and others, and subject to internal governance processes
that are the same or substantially similar to those used for financial reporting.
The Task Force recognizes reporting by asset managers and asset owners is intended to satisfy
the needs of clients, beneficiaries, regulators, and oversight bodies and follows a format that is
generally different from corporate financial reporting. For purposes of adopting the Task Force’s
recommendations, asset managers and asset owners should use their existing means of financial
reporting to their clients and beneficiaries where relevant and where feasible.

A
Introduction

The Task Force believes that climate-related financial disclosures should be subject to appropriate
internal governance processes. Since these disclosures should be included in annual financial
filings, the governance processes should be similar to those used for existing financial reporting
and would likely involve review by the chief
financial officer and audit committee, as
Figure 3
appropriate.

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

Principles for Effective Disclosures

D
Disclosure of Strategy
Resilience Using Scenario
AnalysisPrinciples for Effective Disclosures
To underpin its recommendations and help
guide current and future developments inclimate-related financial reporting, the Task
Force developed seven principles for
effective disclosure (Figure 3), which aredescribed more fully in the 2017 report.
When used by companies in preparing theirclimate-related financial disclosures, theseprinciples can help achieve high-quality anddecision-useful disclosures that enable users
to understand the impact of climate change
on companies. The Task Force encourages
companies to consider these principles as
they develop climate-related financial
disclosures.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices1

Disclosures should represent relevant
information

2

Disclosures should be specific and complete

3

Disclosures should be clear, balanced, andunderstandable

4

Disclosures should be consistent over time5

Disclosures should be comparable among
companies within a sector, industry, or
portfolio

6

Disclosures should be reliable, verifiable,
and objective

7

Disclosures should be provided on a timely
basis

The Task Force’s disclosure principles are largely consistent with internationally acceptedframeworks for financial reporting and are generally applicable to most providers of financial
disclosures. The principles are designed to assist companies in making clear the linkages between
climate-related issues and their governance, strategy, risk management, and metrics and targets.

15

Financial filings refer to the annual reporting packages in which organizations are required to deliver their audited financial results under the
corporate, compliance, or securities laws of the jurisdictions in which they operate. While reporting requirements differ internationally, financial
filings generally contain financial statements and other information such as governance statements and management commentary.

The Task Force on Climate-related Financial Disclosures32. Purpose of Report
In February 2017, the Financial Stability Board welcomed a proposal by the Task Force to continue
its work until at least September 2018 to focus on promoting and monitoring adoption of therecommendations by companies.16 As part of its efforts to promote and monitor adoption of therecommendations, the Task Force prepared a status report for the FSB, published on September
26, 2018. In its press release announcing the 2018 status report, the FSB noted that it asked theTask Force to publish a further status report in June 2019 to allow for analysis of disclosures madein 2018 financial reports. This report—the Task Force’s 2019 status report—provides (1) anoverview of disclosure practices that are aligned with the Task Force’s recommendations over athree-year period, (2) information on the adoption and use of the TCFD recommendations, and (3)other information to support preparers in implementing the recommendations.
The remainder of this report is organized as follows:A
Introduction

BState of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis

E
User Perspectives on
Decision-Useful ClimateRelated Financial
DisclosuresF
Initiatives Supporting
TCFDState of Climate-Related Financial Disclosures. This section provides an overview of thecurrent state of climate-related financial disclosures in terms of their alignment with the TCFD
recommendations across different industries and highlights how such disclosures havechanged over a three-year period. It also includes examples of disclosures that provide
information aligned to one or more of the 11 recommended disclosures.
Adoption and Use of the TCFD Recommendations. This section summarizes the results ofa survey on companies’ efforts to implement the TCFD recommendations as well as users’
views on the usefulness of available climate-related financial disclosures for financial
decision-making.
Disclosure of Strategy Resilience Using Scenario Analysis. This section highlights the useof scenario analysis by companies for assessing the resilience of their strategies as well as
trends and potential challenges facing companies in disclosing information about theresiliency of their strategies to a range of climate-related scenarios.
User Perspectives on Decision-Useful Climate-Related Financial Disclosures. This section
describes the types of information individual investors and analysts (users) look for inclimate-related financial disclosures and provides examples of disclosures that, consistent
with the TCFD recommendations, those individual users view as providing decision-useful
information.
Initiatives Supporting TCFD. This section describes various initiatives aimed at supporting
preparers and users of climate-related financial disclosures.
Appendices. These sections provide supplemental information on the Task Force, themethodology for its review of disclosures, a glossary of terms, and references.

Appendices

16

FSB, “FSB assesses implementation progress and effects of reforms,” February 28, 2017.

The Task Force on Climate-related Financial Disclosures4

ductionof Climate-Related
cial Disclosurestion and Use of the
Recommendations

osure of Strategy
ence Using Scenariosis

B State of ClimateRelated Financial
Disclosures

Perspectives on
ion-Useful Climateed Financial
osurestives Supporting

ndicesThe Task Force on Climate-related Financial Disclosures

5B. State of Climate-Related Financial Disclosures
The TCFD received feedback that the baseline information on climate-related financial disclosuresin its 2018 status report was helpful for companies implementing the TCFD recommendations. In
addition, users, preparers, and others have expressed interest in understanding changes inclimate-related financial disclosures over time, particularly as many companies have now had afull reporting cycle to implement the TCFD recommendations since their release in June 2017.
Therefore, the Task Force undertook a second review of companies’ reports for climate-related
financial information using artificial intelligence (AI) technology.17 To better assess the current
state and evolution of climate-related financial disclosures, the Task Force reviewed the reports ofover 1,100 companies for three years: 2016, 2017, and 2018.
In addition, a small group of Task Force members selected examples of disclosure that provide
information aligned to one or more of the 11 recommended disclosures. The Task Force tried toinclude examples from a geographically diverse set of companies and to cover all 11
recommended disclosures. The examples included are not intended to represent “best practice”
nor demonstrate disclosures that fully meet the associated recommended disclosure.18 Instead,the examples are provided because they may help companies generate ideas for their own
disclosures.
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

1. Scope and ApproachThis section provides a brief summary of the scope and approach used to assess the alignment of
2016, 2017, and 2018 reporting with the Task Force’s 11 recommended disclosures. Moreinformation on the Task Force’s methodology is provided in Appendix 2: Disclosure Selection andReview Methodology.
The Task Force reviewed financial filings, annual
reports, integrated reports, and sustainability
reports of over 1,100 companies from 142
countries in eight industries (Figure 4).19 Six of theeight industries align with groups highlighted in the
Task Force’s 2017 report: Banking, Insurance,
Energy, Materials and Buildings, Transportation,
and Agriculture, Food, and Forest Products. To
incorporate additional companies that may be
exposed to climate-related risks, two additional
industries were added to the review—Technology
and Media and Consumer Goods. The scope of thereview was also broadened to include multiple
years of reporting rather than the approach takenin the Task Force’s 2018 status report in which only
the most recently available disclosures wereassessed.20

DDisclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesFigure 4

AI Review Population Size
Industry

NumberBanking

104

Insurance

147

Energy128

Materials and Buildings

213

Transportation

223

Agriculture, Food, andForest Products

166

Technology and Media

63

Consumer Goods

82

Total

1,126

The Task Force identified an initial review
population of over 2,500 companies spread across the eight industries. Companies that did nothave annual reports available for review in all three years were removed from the population to
The Task Force gratefully acknowledges the work of PwC and the efforts led by Richard Berriman, Joaee Chew, Anna Nicholas, and Will
Barnsley from PwC in developing, refining, and providing results from the AI technology review.
18
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
The Task Force used revenue to identify the largest public companies in non-financial industries and total assets for banks and insurancecompanies.
20
The industries and companies reviewed in the 2019 status report are different than those reviewed in the 2018 status report, therefore,
results for 2018 and 2019 are not directly comparable.
17

The Task Force on Climate-related Financial Disclosures

6

ensure a consistent population of companies and comparable reporting across all three years.
Because the Task Force was asked to deliver the 2019 status report by early June 2019, not all
2018 annual reports were available at the time of review. This significantly reduced the number ofcompanies from the initial population that could be included in the AI review. Companies werealso removed from the initial population if they did not have annual reports available in English inall three years, which further reduced the number of companies included in the AI review. Thisapproach resulted in a final review population of 1,126 companies.
Similar to the approach used to review climate-related financial disclosures for the 2018 status
report, the Task Force again used AI technology to review companies’ reports. The AI technology
was used to review nearly 8,000 reports from the 1,126 companies and determine whether thereports included information that appeared to align with one or more of the Task Force’s 11
recommended disclosures. Importantly, this approach was not designed to assess the quality ofcompanies’ climate-related financial disclosures, but rather to provide an indication of thealignment of existing disclosures with the Task Force’s 11 recommended disclosures.21

A
Introduction
B
State of Climate-Related
Financial Disclosures

Also consistent with the approach used in developing the 2018 status report, asset managers andasset owners were excluded from the AI review because, in many cases, the types of reports
needed for analysis are not publicly available. However, because asset managers and asset
owners play an important role in the investment chain, the Task Force reviewed the aggregate
responses of 349 asset managers and 131 asset owners to the United Nations Principles of
Responsible Investment (UN PRI) 2018 signatory assessment. The results of this review aredescribed in Section B.4. TCFD-Aligned Reporting by Asset Managers and Asset Owners.

2. Key Takeaways

C
Adoption and Use of the
TCFD Recommendations

This section summarizes the overall results and takeaways from the Task Force’s AI review ofcompanies’ 2016, 2017, and 2018 reports for alignment with the Task Force’s 11 recommended
disclosures.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis

Many companies disclose some climate-related information, but more progress is needed.
Overall, the AI review results indicate that while climate-related financial disclosure has increased
since 2016, only around 25% of companies disclosed information aligned with more than five of
the 11 recommended disclosures and only 4% of companies disclosed information aligned with atleast 10 of the recommended disclosures. As described in the Executive Summary, given the
speed at which changes are needed to limit the rise in the global average temperature—across awide range of sectors—more companies need to consider the potential impact of climate changeon their businesses, strategy, and financial planning and disclose material findings.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

The percentage of companies disclosing climate-related information has increased, but
overall is low. The AI review of available reports found that the percentage of companies
disclosing information aligned with the TCFD recommendations increased between 2016 and2018 for all of the 11 recommended disclosures. Figure 5 (p. 8) shows the overall review resultsfor each TCFD recommended disclosure.

Appendices

The greatest increase in the percentage of companies disclosing relevant information from 2016
to 2018—10%—was found for disclosure of climate-related risks and opportunities (Strategy a)and the impact of climate-related risks and opportunities on the company’s businesses, strategy,
and financial planning (Strategy b). However, the percentage of companies disclosing informationon the resilience of their strategies, taking into consideration different climate-related scenarios,
including a 2°C or lower scenario (Strategy c) increased only 3% over the same time period.

21

It is important to recognize the confidence of the AI technology in identifying disclosures that align with the Task Force’s 11 recommended
disclosures varies for each recommended disclosure, as described in Appendix 2: Disclosure Selection and Review Methodology.

The Task Force on Climate-related Financial Disclosures

7

Importantly, the percentage of disclosure is not greater than 50% for any recommended
disclosure, even those related to governance and risk management, which the Task Forcerecommends all companies disclose. In fact, the recommended disclosures related to governanceand risk management have the lowest percentages of disclosure with the exception of Strategy c).
As part of the 2018 TCFD survey, some preparers noted challenges disclosing information related
to these recommendations because climate-related issues are integrated into company-wide
governance and risk management processes, making separate disclosure unnecessary. See
Section C. Adoption and Use of the TCFD Recommendations for more information.
Figure 5

TCFD-Aligned Disclosures by Year
Recommendation Recommended
Disclosure% Change
2016-2018% of Companies that Disclose Information Aligned with TCFD
Recommended Disclosures

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Legend:Percentage of companies that disclosed information aligned with TCFD recommended disclosures in 2018

The average number of recommended disclosures
per company has increased. The AI review found theaverage number of the 11 recommended disclosures
addressed by companies in their public reports greweach year between 2016 and 2018, from 2.8 in 2016,
to 3.1 in 2017, and to 3.6 in 2018, as shown in Figure
6. Similarly, in 2016, 70% of companies in the review
population disclosed information aligned with at least
one of the Task Force’s recommendations, and that
number grew to 78% in 2018.
The Task Force on Climate-related Financial Disclosures

Figure 6

Recommended
Disclosures per Company
Year

Average Number Disclosed

2016

2.8

2017

3.1

2018

3.6

8

Disclosures are made in multiple reports. Companies disclosed information aligned with the
TCFD recommendations in multiple types of reports (e.g., financial filings, annual reports,
integrated reports, and sustainability reports), which is consistent with the Task Force’s findings in
its 2018 status report. The AI review found that, on average, information aligned with therecommended disclosures was more likely to be disclosed in sustainability reports than in
financial filings or annual reports. However, between 2016 and 2018, information aligned with therecommended disclosures included in financial filings or annual reports increased by almost 50%
compared to an increase of about 30% in sustainability reports.
Disclosure increases with company size. The Task Force divided the AI review population into
three categories to assess results by company size: those with less than $4 billion in annual
revenue, those with $4 billion to $10 billion in annual revenue, and those with more than $10
billion in annual revenue. The results of the assessment by company size for 2016, 2017, and2018 (Figure 7) are consistent with the Task Force’s 2018 disclosure review—that the percentage
of companies disclosing information in alignment with the TCFD recommendations tends toincrease with company size. For each recommended disclosure, the percentage of companies
disclosing relevant information in 2018 grew as the category of company size increased.
Figure 7

A
Introduction

Disclosure by Company Size: 2018 Reporting

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices<$4B Annual
Revenue$4-10B Annual
Revenue>$10B Annual
Revenue

Recommendation

Recommended Disclosure

(620)

(184)

(322)

Governancea. Board Oversight

19%

27%

34%

b. Management's Role

18%

32%

43%

a. Risks and Opportunities

31%

45%

56%

b. Impact on Organization

30%

53%

65%

c. Resilience of Strategy

3%

7%

14%

a. Risk ID & Assessment Processes

17%

33%

42%

b. Risk Management Processes

17%

34%

44%

c. Integration into Overall Risk
aiiManagement

9%

14%

19%

a. Climate-Related Metrics

28%

47%

63%

b. Scope 1,2,3 GHG Emissions

19%

38%

51%

c. Climate-Related Targets

22%

48%

55%

Strategy

Risk Management

Metrics and Targets

The numbers in parentheses represent the size of the review population

Legend:Low to high percentage of disclosure# # # # # # # # # # #Disclosure varies across regions. Companies in the AI review population were categorized into
five regions—Asia Pacific, Europe, Middle East and Africa, North America, and South America—
based on the location of their headquarters to consider potential regional differences. As shownin Figure 8 (p. 10), companies in Europe had relatively high percentages of disclosure of
information aligned with the TCFD recommendations. The Asia Pacific, North American, and SouthAmerican regions had broadly similar percentages of disclosure across the recommended
disclosures, and all had lower percentages of disclosure than Europe. In addition, consistent withthe overall results, Strategy c) had the lowest percentage of disclosure in each region.

The Task Force on Climate-related Financial Disclosures9

Figure 8

Disclosure by Region: 2018 Reporting

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

North
AmericaSouth
America

(484)

(363)

(83)

(163)

(33)

Governancea. Board Oversight

23%

36%

26%

20%

17%

b. Management's Role

27%

44%

22%

21%

13%

a. Risks and Opportunities

29%

59%

24%

51%

39%

b. Impact on Organization

44%

61%

23%

40%

41%

c. Resilience of Strategy

5%

13%

3%

7%

4%

a. Risk ID & Assessment Processes

23%

45%

17%

26%

18%

b. Risk Management Processes

22%

41%

16%

33%

32%

c. Integration into Overall Risk
aiiManagement

10%

24%

7%

8%

8%

39%

62%

18%

38%

36%

b. Scope 1,2,3 GHG Emissions

25%

48%

13%

37%

33%

c. Climate-Related Targets

32%

58%

17%

33%

34%

Metrics and Targets a. Climate-Related Metrics

C
Adoption and Use of the
TCFD Recommendations

Middle East
and Africa

Recommended Disclosure

Risk Management

B
State of Climate-Related
Financial Disclosures

EuropeRecommendation

StrategyA
Introduction

Asia Pacific

The numbers in parentheses represent the size of the review population

Legend:Low to high percentage of disclosure# # # # # # # # # # #Disclosure of resilience of strategy and scenario analysis remains low. As shown in Figure 5(p. 8), the AI review found the lowest percentage of disclosure aligned with Strategy c), theresilience of the company’s strategy taking into consideration different climate-related scenarios,
in all three years reviewed. While the percentage of companies disclosing increased between
2016 and 2018, only 9% of companies in 2018 disclosed information on strategy resilience. It is
important to note that using the AI technology to review Strategy c) was particularly challenging
because there were few disclosures available to train the technology. As noted in the responses
to the 2018 TCFD survey, companies have found this recommended disclosure to be one of themost challenging to implement.

F
Initiatives Supporting
TCFD
Appendices

The Task Force on Climate-related Financial Disclosures103. Climate-Related Financial Disclosures for Select Industries 2016-2018
This section summarizes the results of the AI review of 2016, 2017, and 2018 disclosures andprovides examples of disclosure for each of the industries shown in Figure 9. In comparing 2018
results across industries, the Banking industry generally had the highest percentages across therecommended disclosures. However, other industries had higher percentages for specificrecommended disclosures, for example, Energy and Materials and Buildings had higher
percentages of disclosure for Strategy b) by about 10%. Of the two new industries added to thereview population, Consumer Goods had levels of disclosure that were higher than Technology
and Media and nearly comparable to Energy and Materials and Buildings.
Figure 9

Disclosure by Industry: 2018 Reporting
Recommendation
Governance

StrategyA
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

Risk Management

Metrics andTargets

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Recommendation
Governance

Strategy

Risk Management

Appendices

Metrics andTargets

Recommended Disclosure
a. Board Oversight

Banking(104)

Insurance(147)

Energy(128)

Materials &Buildings
(213)

48%

29%

38%

37%

b. Management's Role

54%

35%

32%

35%

a. Risks and Opportunities

51%

39%

57%

50%

b. Impact on Organization

55%

26%

64%

65%

c. Resilience of Strategy

20%

12%

13%

12%

52%

30%

38%

41%

46%

33%

42%

39%

32%

16%

21%

18%

a. Risk ID & Assessment
Processesb. Risk Management
Processesc. Integration into Overall
Risk Management
a. Climate-Related Metrics

51%

27%

49%

63%

b. Scope 1,2,3 GHG
Emissions

42%

22%

39%

41%

c. Climate-Related Targets

50%

24%

45%

53%

Transportation(223)

Ag., Food, &Forest(166)

Technology
and Media(63)

Consumer
Goods
(82)

Recommended Disclosure
a. Board Oversight

25%

22%

19%

29%

b. Management's Role

18%

26%

17%

40%

a. Risks and Opportunities

39%

40%

38%

50%

b. Impact on Organization

34%

45%

25%

52%

c. Resilience of Strategy

5%

4%

2%

6%

23%

24%

24%

22%

17%

26%

19%

23%

11%

9%

17%

21%

a. Risk ID & Assessment
Processesb. Risk Management
Processesc. Integration into Overall
Risk Management
a. Climate-Related Metrics

36%

45%

37%

55%

b. Scope 1,2,3 GHG
Emissions

29%

26%

29%

38%

c. Climate-Related Targets

32%

30%

24%

51%

The numbers in parentheses represent the size of the review population

Legend:Low to high percentage of disclosure# # # # # # # # # # #The Task Force on Climate-related Financial Disclosures

11

Banking
AI Review Summary
The AI technology reviewed disclosures from 104 banks in three sub-industries: regional banks;large, diversified banks; and investment and asset management firms. The 104 banks ranged insize from about $4 trillion to $8 billion in assets, with a median asset size of over $200 billion in
assets. The AI review results for banks are shown in Figure 10.
For nearly every recommended disclosure the percentage of banks disclosing relevant
information was higher than the average across all companies reviewed. Banks’ disclosure of
information in alignment with the TCFD recommendations increased from 2016 to 2018 for all 11
recommended disclosures, although in 2017 there was a slight decrease in disclosure for three ofthe 11. There was a significant increase of 14% in disclosure of both Governance a) and Risk
Management c) between 2016 and 2018, showing that banks are increasingly disclosing theboard’s oversight of climate-related issues and the integration of climate-related risks andopportunities into overall risk management processes. This trend is particularly notable as theresults for Risk Management c) were some of the lowest in the overall results for all companies.

A
Introduction

Figure 10

Banking Review Results by Year

B
State of Climate-Related
Financial Disclosures

Recommendation Recommended
Disclosure% Change
2016-2018

Percent of Companies that Disclose Information Aligned with
TCFD Recommended Disclosures

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Legend:Percentage of total population that disclosed information aligned with TCFD recommended disclosures in 2018

The Task Force on Climate-related Financial Disclosures

12

Examples of Disclosure Aligned with TCFD Recommendations: Banking
Governance Recommendation
Governance a) asks companies to describe the board’s oversight of climate-related risks andopportunities, and Governance b) asks companies to describe management’s role in assessing andmanaging climate-related risks and opportunities. Figure 11 provides a bank’s description of theboard’s oversight and management’s role in evaluating climate-related risks and opportunities.
Figure 11

Excerpt from Annual Report
Climate Change Risks
In February 2018, Scotiabank announced its support of the Financial Stability Board (FSB) Task Force on
Climate-related Financial Disclosures (TCFD). This particular disclosure relates to the Bank’s non-retailloan book. Additional disclosures relating to the non-retail loan book as well as other aspects of theBank’s operations will be included in the 2018 Corporate Social Responsibility Report.

Governance
Board Oversight
Climate Change risk and related disclosure is reviewed and discussed at several committees within the
Board, including the Risk Committee and Audit and Conduct Review Committee, as well as by the full
Board of Directors.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

The Risk Committee, however, retains primary oversight responsibility for climate change related risks
and opportunities with respect to the Bank’s loan portfolio. As part of this responsibility, in 2018 theRisk Committee reviewed a Future of Energy report as part of its industry analyses and review ofclimate change risks. The Risk Committee advises the Board on key and emerging risks and related
policies (e.g., Environmental Policy and Credit Risk Appetite) and reviews the Bank’s management of
key risks such as climate change. Reporting on such risks and opportunities is provided to the Risk
Committee via the Emerging Risks section of the quarterly Enterprise Risk Management Report (whenappropriate), as well as review and approval of industry reports and individual credit submissions. Any
significant climate-related natural disasters affecting the Bank’s loan book would also be discussed at
Risk Committee.
The Corporate Governance Committee is also engaged, as it acts in an advisory capacity to the Board
through a continuing assessment of the Bank’s approach to corporate governance and makes policy
recommendations. Amongst its responsibilities, this Committee reviews the Bank’s corporate social
responsibility strategy and reporting. This includes climate change, as one of the Bank’s corporatesocial responsibility priorities.
Management’s Role
The Bank’s existing Environmental Policy and Credit Risk Policy are the two main policy tools for
identifying and managing climate related risks associated with the Bank’s non-retail lending portfolio.
These risks are identified, assessed and managed through the Bank’s credit risk and environmental risk
due diligence and adjudication processes. In 2018, the Bank continued its work on enhancing its
climate change due diligence as part of the overall environmental risk due diligence process.
Specific and emerging risks and issues are raised to the relevant levels of management and/or risk
committees for discussion or resolution and when deemed appropriate are reported quarterly in the
Emerging Risk section of the Enterprise Risk Management Report to the Risk Committee of the Board.
The day-to-day responsibility for managing and reporting on climate change risk rests within Global
Risk Management and its dedicated Environmental and Social Risk (ESR) team. The ESR team has
responsibility for the integration of climate change considerations into individual credit applications
and industry reviews, through the development and implementation of climate-related risk policies,
procedures, tools and the provision of training to banking officers and credit adjudicators. The teamalso assists with the review of transactions to ensure climate-related risks are appropriately identified,considered and mitigated.
North America: Scotiabank, 2018 Annual Report, pp. 87-88

The Task Force on Climate-related Financial Disclosures

13

Risk Management Recommendation
Risk Management a) asks companies to describe their processes for identifying and assessing
climate-related risks. Figure 12 provides a bank’s description of its approach for identifying andassessing climate-related risks.

Figure 12

Excerpt from Annual Report

CreditWe include the climate change variable in theanalysis of the Environmental and Social risk ofcompanies and projects. When we analyze a projectfrom a carbon-intensive sector, regardless of value
and the product involved, the Environmental andSocial Risk Management may requests the inventoryof GHG and includes its materiality as one of therequirements in the pre-approval process.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Additionally, in 2017 we started a project to identify
and monitor emissions we finance in our corporateloan portfolio for the products as follows: Vehicles,
Real Estate, Rural and Electricity. Each sector was
analyzed according to its peculiarities and CO2
emissions linked to its activities. The scope of eachportfolio was defined among the assumptions:

Vehicles: Vehicle used during the financing
period.

Real estate: Emissions generated during theworks period.

Environmental and Social Risk Analysis

ClimatechangeConsumptionof natural
resources

RegulatorychangeLitigation
trend

Effluents

Labor
condition

Keydrivers
TechnologicalchangeOperationaland market
barriers

Water/soil
contamination

Health andsafetyHazardous
materials andpesticides

Solid
waste
Atmosphericemissions

Rural: Agribusiness activity, location and change
in land use.

Electricity: Tool developed for previous
concession analysis.

To assess the portfolio risk, credit risk factors wereassociated with the environmental and social topics.
Included:

The tool used to identify emissions in each sector iscustomized to Itaú Unibanco based on the Portfolio
Carbon Initiative guidelines.
Emissions financed in wholesale segment

 Common risks, arising from the production chain

and processes of the sector;
 Risks associated with the portfolio reality; and Risks associated with political, economic, legal, andShare inloan portfolio (%)

CO2E ton to each
R$10,000 financed(1)

Rural

1.0

16.50

Vehicles

0.4

5.80

Real estate

0.3

0.47

Portfolio

In 2017 we also improved a proprietary E&S risk
analysis methodology by using a sector approach
applied to the corporate loan portfolio, so as toreassess the relation between E&S and credit risks. A
mandala with E&S topics was generated for analysisof the portfolio, as shown below, and one of its
assumptions was the climate change impact on
sectors in the short and long terms.

(1) Emissions were calculated by using an internal tool with assumptions specificfor each portfolio.

Portfolios will be monitored from time to time andthese data will be used in other internal studies andprojects to identify any risk mitigation andopportunities.

cultural issues.
Not Included: Management aspects, since the topics vary

according to the company rather than to sector;and; Local idiosyncrasies, since they do not impact thesector as a whole.
This project aims to help our decision making andprovide for the strategic integration of these data.

South America: Itaú Unibanco, Consolidated Annual Report 2017, pp. A-405, A-406

The Task Force on Climate-related Financial Disclosures

14

Metrics and Targets Recommendation
Metrics and Targets a) asks companies to disclose the metrics used to assess climate-related risks
and opportunities in line with their strategy and risk management process. Figure 13 provides abank’s description of its climate-related metrics.
Figure 13

Excerpt from Climate Strategy Report
Climate-related metrics 2018
For the year ended
31.12.2018

31.12.2017

None

None

2.7

6.6

1.2

2.8

Protecting our own assets
Risks
Identified significant climate-related financial risk on balance sheet1
Carbon-related assets (USD bn)2
Proportion of total net credit exposure (%)
Protecting our clients’ assets and mobilizing private and institutional capitalA
Introduction

Opportunities / products and services

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Climate-related sustainable investments (USD bn)3

87.5

74

2.8

2.3

Total deal value in equity or debt capital market services related to climate change
mitigation and adaptation (CCMA) (USD bn)

31.6

44.3

Total deal value of financial advisory services related to CCMA (USD bn)

24.9

5.5

Proportion of UBS clients’ total invested assets (%)

Number of strategic transactions in support of Switzerland’s Energy Strategy 2050

84Number of climate-related shareholder resolutions voted upon

43

34

88.0

82.0

132

148

Proportion of supported climate-related shareholder resolutions (%)4
Reducing our own climate change impact
Greenhouse gas emissions
GHG footprint (kilotons CO2e)5Percentage change from baseline 2004 (Target: –75% by 2020) (%)(63.4)(59.0)

Weighted carbon intensity of the Climate Aware equities strategy (in tons CO2e per
million of USD revenue)6

95.6

117.45(55.7)(44.0)

Compared to benchmark (FTSE Developed World Index) (%)

1 Methodologies for climate-related financial risk are emerging and may change over time. In 2018, a group of 16 banks,
including UBS, and UNEP FI have partnered to refine methodologies for climate-related risks and opportunities. 2 Total net

credit exposure across Personal & Corporate Banking and the Investment Bank, includes traded and banking products. Net ofallowances, provisions, and hedges. As recommended by the TCFD, carbon-related assets are defined as assets tied to theenergy and utilities sectors (Global Industry Classification Standard). Non-carbon-related assets, such as renewables, water
utilities, and nuclear power excluded. For grid utilities, the national grid mix is applied. 2018 year-on-year drop attributed toplanned reductions in Energy and Utilities lending exposure within the Investment Bank. 3 Invested assets of products such assustainably managed properties and infrastructure, and renewable energy. 4 On all proposals that we supported, we voted
against the recommendation provided by the issuer. 5 GHG footprint equals gross GHG emissions minus GHG reductions fromrenewable energy and GHG offsets (gross GHG emissions include: direct GHG emissions by UBS; indirect GHG emissions
associated with the generation of imported / purchased electricity (grid average emission factor), heat or steam and otherindirect GHG emissions associated with business travel, paper consumption and waste disposal). A breakdown of our GHG
emissions (scope 1, 2, 3) is available in the UBS GRI Document 2018. 6 Year-on-year decrease of carbon intensity is mainly
driven by higher carbon targets of the investment strategy. Carbon intensity is based on scope 1 and 2 CO 2 emissions ofinvestee companies, which often rely on third-party estimates.

Europe: UBS, Our Climate Strategy, p. 4

The Task Force on Climate-related Financial Disclosures

15

Insurance
AI Review Summary
The AI reviewed disclosures from 147 insurance companies in four categories: multi-line
insurance, property and casualty insurance, life and health insurance, and reinsurance. The
insurance companies reviewed ranged in size from about $2.7 trillion to $200 million in assets,with a median asset size of around $4 billion in assets. The AI review results for insurancecompanies are shown in Figure 14.
Overall, in 2018 reporting insurance companies most often disclosed information aligned with the
TCFD recommended disclosure Strategy a). Their disclosure of information in alignment with the
TCFD recommendations increased from 2016 to 2018 for nine of the 11 recommended
disclosures, however, the percentage of insurance companies disclosing relevant information in2018 reporting was lower than the overall average for eight of the recommended disclosures. The
insurance companies reviewed showed some of the smallest increases in the percentage of
disclosure between 2016 and 2018, however they exceeded the overall average for disclosure of
Risk Management b).
Figure 14

A
Introduction

Insurance Review Results by Year

B
State of Climate-Related
Financial Disclosures

Recommendation Recommended
Disclosure% Change
2016-2018

Percent of Companies that Disclose Information Aligned with
TCFD Recommended Disclosures

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Legend: Percentage of total population that disclosed information aligned with TCFD recommended disclosures in 2018

The Task Force on Climate-related Financial Disclosures16

Examples of Disclosure Aligned with TCFD Recommendations: Insurance
Strategy Recommendation
Strategy a) asks companies to describe their climate-related risks and opportunities, and Strategyb) asks companies to describe the impact of climate-related risks and opportunities on theirbusinesses, strategy, and financial planning. Figure 15 provides an insurance company’s
description of its physical climate-related risks and their impact on the company.
Figure 15

Excerpt from Financial Filing
Climate-related risks
Physical Risks
Physical risks posed by climate change
could potentially affect four areas of ourbusiness: Reduction/disruption of our own
operations
 Modelling and pricing of weather-related
natural perils
 Impact on the economic viability ofre/insurance for risks exposed to
extreme weather events
Impact on real assets exposed toweather-related natural perils

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Our own operations
According to our in-house catastrophe loss
models, severe weather risks are potentiallyof importance for some of our operations,mainly in Florida and on the northeastern
coast of the US. However, even assuming an
extreme climate change scenario, we do not
expect any of these locations to be exposed
to risk levels that would question theireconomic viability. In 2012, Hurricane Sandy
in New York showed that some of Swiss Re’s
offices are already exposed to severe
weather risks today. In response, we have
sharpened the Group’s business continuity
management to minimise property losses
and business interruption. Thanks to theseinvestments, we are able to swiftly transfer
work tasks to unaffected areas if required
and to keep potential financial impacts
minimal.
Modelling and pricing of
weather-related perils
Based on our proprietary loss modelling, we
calculate the annual expected losses (AEL)
and loss-frequency distributions of the
major weather-related natural
catastrophes; the four perils with thelargest AEL at present are disclosed on page184 (North Atlantic hurricane, US tornado,
European windstorm, Japanese tropical
cyclone). Our models show that with thecurrent climate, the dominant factor isnatural variability affecting both thefrequency and severity of extreme weather
events in all regions.

In addition, we expect weather risk toremain assessable by scientific methods,
meaning we can continue to update ourloss models in the future to assure
adequate costing of extreme weather
events. Since most of the re/insurance
contracts with our clients have a duration of
one year, we can thus adequately pricenatural catastrophe risks by updating ourmodels to reflect the current climate.
Regarding the long-term time horizon(2040), we expect a substantial need toadjust some of our weather risk models,
based on current scientific knowledge. We
are confident, however, that future
research will give us sufficient guidance on
the magnitude and direction of theseadjustments. The potential impact ofclimate change, including natural variability,
is already being assessed and integrated
into our risk view today, eg through regular
updates of tropical cyclone frequencies. In
addition, we conduct internal research andcollaborate with academia to study the
impact on extreme weather events in thenear and medium term.
Impact on the economic viabilityof re/insurance protection
An increase in the frequency and severity of
extreme weather events can restrict theaffordability of re/insurance in certain
regions, especially in coastal areas, by
requiring a rise in premiums. While climate
projections are associated with a large
range of uncertainty, especially when it
comes to storms making landfall, increases
in the frequency and severity of tropicalstorms are likely. Natural variability is
expected to remain the dominant factor in
the short and medium time horizon (2025
and 2030). In the longer term (2040),
though, sea level rise will lead to non-linear
increases in the storm surge risk for coastal
areas. Additionally, warmer temperatures
will lead to more extreme rainfall events
that may increase flood risk.

We expect this to remain the case both in
the short and medium term (ie 2025 and2030), in line with the latest scientificfindings (see the IPCC Fifth Assessment
Report, chapter 11, and the IPCC Special
Report 15).

If rises in re/insurance premiums
necessitated by increasing extreme weather
risks remain modest, ie re/insurance
protection remains economically viable forour clients, the overall premium volume will
actually grow. Larger increases, however,will reverse this effect eventually by pushingre/insurance prices for certain exposedrisks beyond the limits of economic viability.
This is particularly relevant for areas withinadequate construction planning anddevelopment. In addition, timing is also of
crucial importance: if measures to exclude aparticular risk are taken too early andwithout broader market support, we canoffer our clients less insurance protection
and may lose significant market share; ifmeasures are taken too late, we may end
up with increased loss potential. Finally, theoverall size of the re/insurance market will
depend on future economic growth rates.
In line with independent external studies,
we have shown through a series of scenario
assessments (Economics of Climate
Adaptation studies, ECA) that in many
regions, climate adaptation measures need
to be taken to limit expected increases innatural catastrophe damages and thus toensure the economic viability ofre/insurance in the future. This is a key
reason why Swiss Re actively engages with
the United Nations, the public sector,
clients, industry peers and employees toadvocate cost-effective adaptation toclimate change.
Impact on real assets exposed
to weather-related perils
Real assets such as real estate are exposed
to natural perils, eg hurricanes, tropical
cyclones and floods. In addition toconsidering physical risk when acquiring
new properties, we analyse these
exposures across the portfolio based on
Swiss Re’s proprietary modelling capabilities
used for our re/insurance underwriting.
This analysis has been extended andrefined recently, and results suggest a very
low exposure to natural perils in generaland to climate-related perils, in particular.
Conclusion: Although the physical risks
arising from climate change will havesignificant economic consequences overtime, especially from a wider societal
perspective, they represent a limited andmanageable risk for Swiss Re.

Europe: Swiss Re, 2018 Financial Report, p. 177

The Task Force on Climate-related Financial Disclosures17

Risk Management Recommendation
Risk Management a) asks companies to describe their processes for identifying and assessing
climate-related risks. Figure 16 provides an insurance company’s description of its approach forassessing climate-related risks.
Figure 16

Excerpt from Climate Report
AXA is reviewing an external methodological framework (developed by Carbon Delta) that models
transition risks at company and sector level relating to “policy risks” (as defined in the TCFD
recommendations) for curbing greenhouse gas (GHG) emissions, which correspond to the long-term goalof the 2015 Paris Agreement to limit climate change below a 2°C temperature increase. AXA is also
assessing transition technology opportunities which would be generated via the development and sale oflow carbon technology solutions to companies that need to comply with GHG reduction requirements.
Only when balancing climate change policy risks on one hand with technology opportunities also
generated by GHG reduction policies on the other hand could one obtain the comprehensive transition risk
exposure for assets in a 2°C scenario.
[…]
A
Introduction
B
State of Climate-Related
Financial Disclosures

CLIMATECHANGE

Climate change
impacts company A

D
Disclosure of Strategy
Resilience Using Scenario
Analysis

A forward-looking “Climate VaR”

F
Initiatives Supporting
TCFD
Appendices

EQUITY

f(x)

BONDS

f(x)

OTHER ASSET CLASSESCOMPANYC
Adoption and Use of the
TCFD Recommendations

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosuresf(x)Calculation of company
A's cost of climate change

What is theimpact on company A's
stocks & bonds

Calculation of thepossible
impact on a portfolio
including company A

Taken together, the “policy risk” model combined with the “technology opportunities” model assess thedownside costs of climate change policy as well as the additional green revenues that are attainable by themost innovative companies in their field. Forward-looking quantitative results are used, in the form ofcompany specific costs and revenues, to calculate a “Climate Value-at-Risk” (Climate VaR) per security in
AXA’s portfolios.
This Climate VaR per security is calculated for equities and corporate bonds to understand the impact that
future costs and/or revenues might have on the current pricing of these securities. A Dividend Discount
Model (DDM) is also used to compute the impact that new, climate policy costs and revenues will have on
future profits, which justify the current market value. The Climate VaR is the exact difference between thecurrent market value of a security and the “new” present value after future climate change costs and/or
revenues have been included into the DDM. The Climate VaR therefore represents the percentage of acompany’s market value that is poised to decrease or increase given the occurrence of climate change
costs or revenues related to each scenario. This means that the Climate VaR can be negative or positive,
depending on risks and upsides.

Europe: AXA, Climate-Related Investment & Insurance Report 2018, p. 9
Note: some content, denoted by “[…],” was deleted in order to fit the page

The Task Force on Climate-related Financial Disclosures18

Risk Management Recommendation
Risk Management a) asks companies to describe their processes for identifying and assessing
climate-related risks. Figure 17 provides an insurance company’s description of elements of its
risk identification processes as they relate to climate change.
Figure 17

Excerpt from Sustainability Report

Addressing Climate Change Risks
Climate change is a global issue, and its impacts are a topic of universal concern. In China, climate
and climate-derived disasters account for 95% of losses from natural disasters. For the insurance
industry, the risks brought by climate change include the uncontrollable loss caused by thefrequent occurrence of extreme weather events [that] create a wide range of economic and socialpressures and reduces insurability.
As the effects of climate change become more apparent, the probability of extreme weather
events, natural disasters and other associated incidents will continue to increase. Heightened
climate change-related risks will cause impacts on our product design and pricing, affecting ourclaim policies and our broader business strategy.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

Global warming and more frequent extreme weather events have raised questions about thereliability of old product pricing models and hence the revenue impact. As a global leading multiline insurance company, Ping An has always responded proactively to business risks andoperational risks arising from climate change. To this end, we evaluate material risk on an annual
basis.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Risk management system

Artificial Intelligence Plus
Smart Environmental
Protection Solution

DRS

Environmental Liability Insurance• Ping An Life and Ping An Property & Casualty have initiated researches and developed amanagement system for climate change-related risks.
• We launched our Smart Environmental Protection solution to monitor and analyze environmental
data. This supports the government as it addresses climate change and natural disaster risks.
• We developed DRS, a system for physical risk identification, analysis and management to assess
the risk of nine types of natural disasters and manage the associated business risks.
• [Ping An] communicates and addresses concerns from stakeholders including government
departments and investors about how we identify and respond to climate change-related
insurance and investment risks.
[…]Through risk identification and ex-ante warning, Ping An has developed an effective risk
management system to alleviate the associated impacts of climate change-related risks.

Asia Pacific: Ping An Insurance (Group) Company of China, 2018 Sustainability Report, pp. 38-39
Note: some content, denoted by “[…],” was deleted in order to fit the page

The Task Force on Climate-related Financial Disclosures

19

Energy
AI Review Summary
The AI reviewed disclosures from 128 energy companies in three categories: oil and gas, coal, andutilities. The energy companies ranged in size from about $430 billion to $10 million in annual
revenue, with a median annual revenue of over $5 billion. The AI review results for energy
companies are shown in Figure 18.
In 2018 reporting, the 128 energy companies most often disclosed information aligned with the
TCFD recommended disclosure Strategy b) on the impact of climate-related risks andopportunities on the company. While the percentage of energy companies reviewed that
disclosed information on Metrics and Targets b), Scope 1, Scope 2, and Scope 3 GHG emissions, fellslightly between 2016 and 2018, there was a significant 15% increase in reporting aligned with
Governance a), board oversight of climate-related risks and opportunities. Twenty percent (20%) of
the energy companies disclosed information on timeframes associated with the climate-relatedrisks and opportunities—a rate 5% higher than any other industry. Overall, in 2018 a larger
percentage of the energy companies reviewed disclosed relevant information than the average
across all industries for all 11 recommended disclosures.
A
Introduction

Figure 18

B
State of Climate-Related
Financial Disclosures

Energy Review Results by Year
Recommendation Recommended
Disclosure% Change
2016-2018

Percent of Companies that Disclose Information Aligned with
TCFD Recommended Disclosures

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Legend:Percentage of total population that disclosed information aligned with TCFD recommended disclosures in 2018

The Task Force on Climate-related Financial Disclosures

20

Examples of Disclosure Aligned with TCFD Recommendations: Energy
Governance Recommendation
Governance a) asks companies to describe the board’s oversight of climate-related risks andopportunities. Figure 19 provides a utility company’s description of the schedule for its
Sustainability Committee’s meetings, including governance of “climate change and othersustainability risks.”
Figure 19

Excerpt from Annual Report
Meetings and Attendance
The Committee meets as frequently as required but not less than twice a year and any Committee Member
may call a meeting. Between 1 January 2018 and the date of this Report, the Committee met four times(including three times in 2018 and once in 2019). The following table provides an overview of how theCommittee spent its time during the period.

FebruaryA
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Sustainability Reporting / Indices performance✓

Community investment activities✓

2018
AugustDecember

2019
February✓✓✓

Climate change and other sustainability risks✓✓

Health, Safety, Security, and Environment

✓

✓

✓

Asia Pacific: China Light and Power Company (CLP), CLP Annual Report 2018, p. 151

Strategy Recommendation
Strategy a) asks companies to describe their climate-related risks and opportunities. Figure 20
provides a utility company’s disclosure of risks related to extreme climate events as well as
potential impacts and measures to mitigate those risks.
Figure 20

Excerpt from Sustainability Report
EMERGINGRISKS

DESCRIPTIONIMPACT

MITIGATION MEASURESAppendices

EXTREME
CLIMATEEVENTS

Structural climatechanges (in particulartemperature andprecipitation), with an
impact on the frequency
and severity of extreme
climatic events (e.g.
floods, droughts, storms,
wildfires)

Damage to physical assets
and loss of revenue
Impact on quality of service
provided (distribution
network).
(Possible) structuralchanges in hydroproductivity (mean andvolatility)







Geographical and technologicaldiversification
Active role in combating climatechange (in particular the promotion of
decarbonisation and energy efficiency)
Adoption of TCFD recommendations
and mapping of main climatic risks
to EDP according to the transition andphysical risks categorization
Existence of dedicated areas andplans for Crisis Management andBusiness Continuity (corporate andmain Business Units)

Europe: Energias de Portugal (EDP), EDP Sustainability Report 2018, p. 50

The Task Force on Climate-related Financial Disclosures21

Strategy Recommendation
Strategy b) asks companies to describe the impact of climate-related risks and opportunities on
their businesses, strategy, and financial planning. Figure 21 provides a utility company’s disclosureof the impact of climate-related risks and opportunities.
Figure 21

Excerpt from Integrated ReportA
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

We are convinced that in order to give a comprehensive portrayalof the company, it is not only necessary to describe the economic,
ecological and social context but also to illustrate and provide ananalysis of interdependencies in this report. Linking together thevarious goal dimensions is an important element of integrated
reporting. At the same time, this type of reporting encourages aholistic corporate management approach within EnBW. In order toillustrate these interdependencies, the key performance indicators
for the goal and performance management system are used. The
basic assumption for illustrating interdependencies is that a change
in one key performance indicator can also lead, in many cases, tochanges in one or more other key performance indicators.
Reciprocal relationships thus exist between the key performanceindicators – in the most extreme case, all of the key performanceindicators can even influence each other. In this context, theinvestment guidelines have been adapted in the 2018 financial
year: Non-financial aspects such as environmental and climate
protection goals will be taken into account to a greater extent forinvestment projects (p. 88).
We have illustrated these interdependencies since 2015 using
concrete examples that were important for the company in the pastfinancial year or will be in the future and can thus also be found inother sections of the report. As part of an internal coordination
process, various examples were examined by several specialist areasand selected based on the respective feedback.
In order to illustrate the interdependencies in 2018, we haveselected two areas in which EnBW was already engaged in the pastfinancial year but which will become even more important in the
future. The expansion of the HVDC connections as part of the
SuedLink and ULTRANET projects will accompany us over the
next few years. New, powerful transmission grids will form the
backbone of the Energiewende, especially for transporting energythat has been sustainably generated in northern Germany to themain consumption areas in southern Germany (p. 62). We
anticipate that there will be a direct or potential influence on many
key performance indicators. Digitalisation initiatives are anotherexample. EnBW is focussing on three main areas in its digitaltransformation: products and processes, technologies, and people
and organisations (p. 39). Due to the diverse range of impending
changes, we anticipate that there will be a direct or potential
influence on many key performance indicators.
The key performance indicators that are directly influenced are
positioned in the centre of the diagram and should essentially bedirectly measurable. The interdependencies between the financial
and strategy key performance indicators are also essentially directly
measurable and are represented in the example diagrams byorange arrows. The interdependencies with the other non-financial
key performance indicators are difficult to measure and generally
tend to be potential or long term in nature. They are represented
by grey arrows. In the 2018 financial year, these interdependencies
were not measured individually. They are presented based oninternal discussions with the relevant specialist areas and those
responsible for the performance indicators. The upward pointing
arrows show a positive influence on the key performance indicator,
while the downward pointing arrows show a negative influence.

Interdependencies between key performance indicators using the construction of HVDC connections as an example

Customers / society
TOP

Reputation
Index

due to activities togenerate transparency
and trust

due to a lack of legitimisation for project andpublic relations measures

F
Initiatives Supporting
TCFD

Finance

Construction of the
SuedLink and ULTRANETHVDC connections by
TransnetBW

from start of investment
measures (earnings fromuse of the grids due toreturning cash flows
from investing activities)

Adjusted
EBITDA

from start of investment
measures

ROCE

Appendicesonce commissioned

Strategy

in investment phasesfrom start of investment
measures (earnings fromuse of the grids due to returning cash flows from investing activities)
Employees
TOP

ECI

through securing competitiveness and future
viability

TOP

Share of adjusted EBITDA
accounted for by Grids

TOP

TOP

TOP

Internal
financingcapability

Environment

due to better electricity
supplies from RE above
all in southern Germany

Direct influence

Positive influence on key performance indicator

Potential/ long-term influence

Negative influence on key performance indicator

TOP

CO2
intensity

Europe: Energie Baden-Württemberg (EnBW), Integrated Annual Report 2018, pp. 53-54

The Task Force on Climate-related Financial Disclosures

22

Transportation
AI Review Summary
The AI reviewed disclosures from 223 transportation companies in six categories: air freight, railtransportation, passenger air transportation, trucking services, maritime transportation, andautomobiles. The transportation companies ranged in size from about $280 billion to $17 million
in annual revenue, with a median annual revenue of approximately $1 billion. The AI review
results for transportation companies are shown in Figure 22.
In 2018 reporting, the 223 transportation companies most often disclosed information alignedwith the TCFD recommended disclosure Strategy a), climate-related risks and opportunities, while
the lowest percentage of disclosures related to Strategy c), resilience of the organization’s strategy
to climate-related risks and opportunities. There was a notable 12% increase in disclosure of
Metrics and Targets c), climate-related targets, between 2016 and 2018. However, disclosure of Risk
Management b) increased only 1% over the same time period, with a slight decrease in 2017.
Overall a smaller percentage of transportation companies disclosed relevant information than the
average across all industries for all 11 recommended disclosures.

A
Introduction

Figure 22

B
State of Climate-Related
Financial Disclosures

Transportation Review Results by Year
Recommendation Recommended
Disclosure% Change
2016-2018

Percent of Companies that Disclose Information Aligned with
TCFD Recommended Disclosures

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Legend:Percentage of total population that disclosed information aligned with TCFD recommended disclosures in 2018

The Task Force on Climate-related Financial Disclosures

23

Examples of Disclosure Aligned with TCFD Recommendations: Transportation
Governance Recommendation
Governance b) asks companies to describe management’s role in assessing and managing climaterelated risks and opportunities. Figure 23 provides an airline’s description of specific management
roles responsible for processes to assess and manage climate-related risks and opportunities.
Figure 23

Excerpt from Environmental Social Governance Report
Governance
Disclose the organization’s governance around climate-related risks and opportunities.
JetBlue integrates environmental, social, and governance (ESG) related risk assessment andopportunities into its larger enterprise risk management processes. To manage this process,
JetBlue employs a dedicated Sustainability and ESG executive to oversee the sustainability
efforts of our entire airline and to keep our management team and relevant board committees
aware of climate-related risks and opportunities when developing strategy, performance, andbudgets.
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis

Specifically, climate change risk and opportunity assessment is led by JetBlue’s Head of
Sustainability. Actions are assessed at an officer level, with quarterly briefings to the Executive
Vice President General Counsel. Risk assessment related to possible emissions regulations is
ongoing.
Board committee involvement is determined based on the financial exposure and likelihood of agiven environmental or social risk factor. The top environmental issues reviewed by the board
are 1) the cost of carbon-offsetting compliance and strategy to mitigate cost; 2) market
opportunities to use bio-jet fuel to hedge fuel cost; and 3) the integration of environmental andsocial risk factors into enterprise risk management. The Audit Committee of the board engages
on relevant ESG issues, questions, and trends.
North America: JetBlue Airways Corporation, 2017 Environmental Social Governance Report, p. 29

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

The Task Force on Climate-related Financial Disclosures24Strategy Recommendation
Strategy c) asks companies to describe the resilience of their strategies, taking into considerationdifferent climate-related scenarios, including a 2°C or lower scenario. Figure 24 provides an airline
company’s description of scenario analysis it has undertaken to assess its strategy resilience.
Figure 24

Excerpt from Annual Report and Accounts
Climate related scenario analysis
In line with our commitment to TCFD we haveundertaken climate-related scenario analysis toreview the resilience of our business strategies
in the context of climate change. We regard thisas an iterative process and will be continuing toconsider further climate scenarios and develop
more quantitative conclusions.
In 2018 we followed the TCFD six step process
to consider two contrasting scenarios:A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD• 2⁰C scenario, consistent with meeting
the Paris Agreement Goal (Representative
Concentration Pathway ‘RCP 2.6’)• 4⁰C scenario as an alternative highemission scenario (RCP 8.5)
We considered the implications of these two
climate scenarios on our business in 2030,
assuming we have the same business activities
as we do today. 2030 was selected as a nearer
term consideration en-route to 2050, whichis the target year for our 50% net CO2
reduction target.
The analysis included an initial qualitative
assessment of potential IAG response in termsof changes to business model, portfolio mix,
investments in transition capabilities andtechnologies and the potential impact on
strategic and financial plans.
Broadly, the 2 degrees scenario demonstrated
that IAG would incur additional operating costs,
mainly as a result of the increased cost ofcarbon or other policy interventions. The 4
degrees scenario also demonstrated that IAG
would incur additional operating costs, but inthis case, these would more likely arise fromincreased cost of operational disruption due toincreased frequency of extreme weather events.
Initial outcomes of the exercise have resulted in
IAG establishing new partnerships through ouraccelerator programme ‘Hangar51’, to deliver
innovations in fuel efficiency and low carbon
technologies. Other initiatives are also being
developed. The process has also meant that wehave identified and disclosed several new
climate-related challenges this year.
In 2019 we will consider a 1.5 degree scenario
and potential IAG pathways towards achieving
net zero emissions by 2050.

Europe: International Airlines Group, Annual Report and Accounts 2018, p. 54

Appendices

The Task Force on Climate-related Financial Disclosures

25Strategy and Risk Management Recommendations
Strategy a) asks companies to describe the climate-related risks and opportunities they haveidentified over the short, medium, and long term; and Risk Management b) asks companies to
describe their proceses for managing climate-related risks. Figure 25 provides a description of arail freight company’s climate-related risks and its approach to managing those.
Figure 25

Excerpt from Sustainability Report
Table 3 — Response to Climate-Related Risks

A
Introduction

Risk

Description

Risk type

Potential impact toour business

Strategic planning, risk mitigation andopportunities

Metrics

Thermal Coal
DemandDemand for thermal
coal is subject toenergy policy and fuelmix decisions driven byenergy costs, energy
security, andregulation ofgreenhouse gas (GHG)
emissions (including
carbon pricing).

Transition:
Market, Policy &Legal, andTechnology

Approximately athird of our network
volumes and half ofrail haulage volumes
relate to continuing
demand for thermalcoal.

 Continue to monitor and hold a view on
demand for seaborne thermal coal(particularly in Asia) in addition to cost andquality of coal supply.

 Coal demand andsupply projections andscenario analysis, (refer
to our Future of Coal
chapter).

Time horizon:
Medium to LongTerm Continue to undertake mine resilience
analysis (based on coal quality, costcompetitiveness and projected mine life) to
inform investment decisions.

Risk level:High Continue to compare our scenario analysis
with a range of projections (e.g.
International Energy Agency).

 Seaborne market
demand/supply.
 Average age of coalfired electricity capacity.
 Thermal coal
generation projections.
 Global coal quality
specifications.

B
State of Climate-Related
Financial Disclosures

Access to
Funding &Licences

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Investor concern overclimate-related risks
may result in higher
cost of capital for ourbusiness and ourcustomers for funding
coal mining, transportand coal-fired power
projects.

Transition:
Reputation
Risk level:
Moderate – High

Refinancing ofexisting borrowing
facilities ordevelopment of newmines, greenfieldrail infrastructure
and coal-fired power
may incur higher
borrowing costs,
delays in approvals
or restrictions on
licence conditions
impacting growth
opportunities.
Time horizon:
Short, Medium
and Long-Term

Climate Change Current and future
Resilience and disruption arising from
Adaptation
increased severity
and/or frequency of
extreme weather
events (higher
temperatures, strong
winds, flooding andassociated erosion,
bushfires and others)

Physical: Acute
Risk level:
Moderate – HighF
Initiatives Supporting
TCFD

CarbonEmissionsManagement
and Reporting

Carbon liability under
the Safeguard
Mechanism Rule andpotential penalties forinappropriate carbon
reporting under the
National Greenhouseand Energy ReportingAct 2007.
Increased opportunity
under federal andstate government
energy/climate targets
and policy instruments.

Transition:
Policy & Legal
Risk level:
Moderate – Low

 Continue to advocate the importance ofAustralian thermal coal supply, used forenergy generation and contributing to a
reduction in GHG emissions relative tolower quality alternatives.

 Disclosure ratings suchas Australian Council ofSuperannuation
disclosure reporting
and CDP Climate
Performance score.

 Continue climate-related disclosures.
 Access a broad range of capital markets
and diversify funding sources/extend
tenure where possible.

May result in loss ofrevenue due toextreme weather
events affecting
mining, transportand port activities
across the supply
chain.

 Continue to design infrastructure to recoverquickly from flooding and extreme weather
events, including the positioning of
inventory such as ballast, flood rock, railand formation material.

May result in higher
costs associatedwith ensuring asset
availability, or toaddress damage toassets.

 Improve engagement with customers on
the estimated recovery timelines by
providing an initial range that is narrowed
as certainty increases.

Time horizon: Short,
Medium and LongTerm

Appendices Continue to advocate the ability ofAustralia’s metallurgical coal (andAustralia’s export infrastructure advantage)to underpin global metallurgical coalsupply, used in steel production.

 Reduce blanket heat-triggered speed
restrictions through more localised realtime monitoring of track temperatures.

 Current/projected
temperatures throughAurizon Networks
Remote Monitoring
System, the Bureau of
Meteorology, and
CSIRO.

 An adaptive design approach to improved
infrastructure resilience is likely togenerate increased trust from key
stakeholders, thereby retaining economic
value and appropriate asset insurance.
 Increasing demand for resilient
infrastructure, particularly in areas
vulnerable to severe weather events.

Facilities exceeding
the emission
baseline may
require the needto purchase
Australian carbon
credit units (ACCUs)
per tonne of CO2e
exceeded.

 Assess future liability under the Emission
Reduction Fund Safeguard Mechanism(current analysis indicates our baselines
are not expected to be surpassed before
2020 with provision to amend baselines ordefer requirement to acquire ACCUs).

Time horizon:
Medium to LongTerm […] Locomotive emissions
intensity (refer to ourEnvironment chapter).

 Incorporate carbon prices into fleet
purchase decisions when considering
electric vs. diesel locomotives.
 Link our GHG emissions to our financial
reporting.
 […]Asia Pacific: Aurizon, 2018 Sustainability Report, p. 21
Note: some content, denoted by “[…],” was deleted in order to fit the page

The Task Force on Climate-related Financial Disclosures

26

Materials and Buildings
AI Review Summary
The AI reviewed disclosures from 213 materials and buildings companies in five categories:
metals and mining, chemicals, construction materials, capital goods, and real estate managementand development. The materials and buildings companies ranged in size from about $100 billion
to $300 million in annual revenue, with a median annual revenue of over $5 billion. The AI review
results for materials and buildings companies are shown in Figure 26.
On 2018 reporting, the 213 materials and buildings companies most often disclosed informationaligned with the TCFD recommended disclosures Strategy b) and Metrics and Targets a). Between
2016 and 2018, there were notable increases in the percentage of companies disclosing inalignment with nearly every recommended disclosure. Overall, a higher percentage of materials
and buildings companies disclosed relevant information than the average across all industries forall 11 recommended disclosures.

Figure 26

Materials and Buildings Review Results by YearA
Introduction
B
State of Climate-Related
Financial Disclosures

Recommendation Recommended
Disclosure% Change
2016-2018

Percent of Companies that Disclose Information Aligned with
TCFD Recommended Disclosures

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Legend:Percentage of total population that disclosed information aligned with TCFD recommended disclosures in 2018

The Task Force on Climate-related Financial Disclosures

27

Examples of Disclosure Aligned with TCFD Recommendations: Materials and Buildings
Governance Recommendation
Governance a) asks companies to describe their board’s oversight of climate-related risks andopportunities. Figure 27 provides a building products company’s summary of its board oversight
as well as a description of where the company discloses information aligned with the TCFD
recommendations.

Figure 27

Excerpts from Annual Report

Roles & responsibilities[…]

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Through the Audit Committee and the Health,
Safety and Sustainability Committee (HSSC), theBoard of Directors oversees LafargeHolcim risk
management, Internal Control and climate change
related risks. The Audit Committee mandate
includes the review of compliance and risk
management processes and review ofmanagement’s and internal audit reports on theeffectiveness of internal control systems and on
the performance of the annual risk assessment
process.
The HSSC mandate is to support and advise theBoard of Directors on the development andpromotion of a healthy and safe environment for
employees and contractors, as well as onsustainable development and social responsibility.
More details of the Audit Committee and HSSC are
disclosed in the Corporate Governance section on
pages 94 and 96.

Task force on Climate-related
Financial Disclosures (TCFD)
As a business leader, we must ensuretransparency and action around climate-relatedrisks and opportunities. LafargeHolcim
therefore supports the voluntary
recommendations of the Financial Stability
Board (FSB) Task force on Climate-related
Financial Disclosures.
The identification, assessment and effective
management of climate-related risks andopportunities are fully embedded in our risk
management process (as described on page 66),
which is subject to continuous improvement.
Governance of climate-related risks andopportunities, including management andBoard roles & responsibilities, are described on
page 98. Our sustainability ambition is on page
46 and further details, including our climate
strategy, can be found in our sustainability
report. Additional metrics & targets are detailed
in our submissions to the Carbon Disclosure
Project. Documents are available onwww.cdp.net/en/responses.

Europe: LafargeHolcim, 2018 Annual Report, pp. 67-68
Note: some content, denoted by “[…],” was deleted in order to fit the page

Appendices

The Task Force on Climate-related Financial Disclosures28

Risk Management and Metrics and Targets Recommendations
Risk Management a) asks companies to describe their processes for identifying and assessing
climate-related risks, and Metrics and Targets b) asks companies to disclose Scope 1, Scope 2, and,if appropriate, Scope 3 GHG emissions. Figure 28 provides a mining company’s description of its
risk assessment process and its disclosure of GHG emissions.
Figure 28

Excerpt from Integrated Annual ReportA
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesGold Fields’ climate change programme
focuses on the assessment and mitigationof climate change-related risks, including
the development and implementation ofaction plans and energy management
programmes to reduce emissions (p70 –73), while at the same time ensuring
water security (p100 – 102). Gold Fields’
objectives are to minimise theCompany’s contribution to climatechange and to build resilience to impactsof climate-related risks on our operations
and host communities. It is increasingly
clear that the negative physical impactsof climate change are real and
immediate, due to:The long-term risks posed byclimate change to the Group’s
operations and surrounding
communities
Increasing efforts to regulate
carbon emissions in most of ourjurisdictions

Taxes increasingly imposed bygovernments on non-renewableenergy consumption

By following the TCFD, we will
be reporting our climate-related
performance in a more targeted andpractical way than before, linking it tofinancial risks and opportunities. In 2019,
we will release our first TCFD report,
which will replace our annual submissionin terms of the CDP, formerly the Carbon
Disclosure Project. The report details
aspects of governance and climaterelated risks, as well as our risk
management framework, our strategic
approach in adapting to and mitigating
impacts of climate change, and presents
trends in our key climate change-related
metrics.

Climate change-related regulations,comprising carbon emission andrenewable energy targets, continue to
evolve across our regions, and we
consistently assess and investigate howthese changes will affect our operations.
These are detailed in the regional reports
on p98 – 99.

Group performance andstrategies

For details of our climate change
management approach, polices
and guidelines, go to
www.goldfields.com/sustainability.p
hp

Task Force on Climate-related
Financial Disclosures (TCFD)

Gold Fields has been disclosing
emissions, risks and opportunities formore than 10 years through the CDP.
Key energy and carbon emissions data
are assured externally. Gold Fields
maintained its A- score for its 2018 CDP
performance, ranking it among theleaders in the mining sector for both ourdisclosures and management practices.

The 2018 Group risk register includes theimpact of climate change among the top
20 Group risks. Furthermore, the Board’s
Safety, Health and Sustainable
Development (SHSD) Committee
reviews the performance of energy andclimate change programmes on aquarterly basis. Every five years we
review our vulnerability to climatechange and develop Group-wide
strategies and programmes in response tothese. During 2017 our Ghanaian
operations’ piloted use of an ICMM
climate-data viewer tool, which provides
insight into physical changes inprecipitation, temperature, wind andwater stress levels. These outcomes wereused in developing adaptation plans, suchBusiness impact on the climate, andcompanies’ ability to withstand climatechange, are issues of increasing global
importance, and vital to our stakeholders.
In 2018, Gold Fields became the second Gold Fields Scope 1 – 3 CO2 emissions
Million tonne CO2-e
Johannesburg Stock Exchange Limited(JSE)-listed company in South Africa(and the first mining company) to
publicly back the United Nations (UN)endorsed recommendations of the TCFD.
The recommendations have been adopted
by many national financial regulators.

as reviewing design flood lines andinclusion of climate change impacts in
our project standards. The ICMM tool isin the process of being rolled out to ourother operations.
Our carbon emission performancemirrors the energy usage trends at
our operations. These are detailed on p70– 73. Gold Fields’ disclosures cover all
three carbon emission scopes, Scope 1 –3, both in absolute figures and intensities.
Total Scope 1 – 3 CO2-e emissions
during 2018 amounted to 1.85Mt, asignificant drop from 1.96Mt in 2017,reflecting the decrease in total energy
usage to 11.62TJ in 2018 from 12.18TJ
in 2017. Emission intensity was
unchanged from the 0.66t CO2-e/oz in
2017, due to a decline in Group gold
production. Our aspirational target is to
reduce cumulative carbon emissions by
800kt CO2-e between 2017 and 2020.
Cumulative carbon emission
reductions from 2017 – 2018 totalled
265kt CO2-e.
Our commitment to low-carbon andrenewable energy is a significant
contributor to our efforts in reducing
carbon emissions. All our operations,other than South Deep, are largely
powered by LP gas, a low carbon energy
source. In Q1 2019, Granny Smith andAgnew announced significant renewableenergy projects to be operational later in2019 or early 2020 (p72). South Deep,
Tarkwa and Damang are also
investigating developing renewableenergy assets in the near future.
Given the water security impact ofclimate change to our operations, we also
closely monitor our water usage andspending and invest in water security andefficiency initiatives.

Middle East and Africa: Gold Fields, Integrated Annual Report 2018, p. 97

The Task Force on Climate-related Financial Disclosures29

Metrics and Targets Recommendation
Metrics and Targets b) asks companies to disclose Scope 1, Scope 2, and, if appropriate, Scope 3
GHG emissions. Figure 29 shows an electrical equipment manufacturing company’s disclosure of
its GHG emissions.

Figure 29

Excerpt from Environmental Performance Report
The symbol “” denotes Mitsubishi Electric Group greenhouse gas emissions
for which third-party verification has been carried out by SGS Japan Inc.

Fiscal 2018 Greenhouse Gas Emissions

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Appendices

Category

Scope1

Direct emissions associated with fuel use at ourcompany

Scope2

Indirect emissions associated with use of
externally-purchased electricity and heating

Scope3A
Introduction

F
Initiatives Supporting
TCFD

Scope

Accounting/10,000 tons-CO2(Scope 3 Emission Rates)

Accounting summary*1
Direct emissions from fuel use and industrial
processes at our company*2

31

Indirect emissions associated with use of electricity
and heat purchased by our company*3

Market based98

Calculated using power emission coefficient basedon contract

Location based97

Calculated using average power-generation emission
coefficient within the zone

Indirect emissions outside the scope of ourcompany's operational activities
Category 1

Purchased goods and services

670

(15%)

Emissions associated with activities up to the
manufacturing of materials, etc. relating to raw
materials, parts, purchased products, and sales*4

Category 2

Capital goads

66(1.5%)

Emissions generated by the construction andmanufacturing of own capital goods

Category 3

Fuel- and energy-related activities
not included in Scope 1 or Scope 2

8.5(0.2%)

Emissions associated with procurement of fuelnecessary for power generation, heat supply, etc. andpower such as electricity supplied by other parties

Category 4

Upstream transportation anddistribution

43(1.0%)

Emissions associated with logistic processes up to thedelivery to our company of materials, etc. relating to
raw materials, parts, purchased products, and sales*5

Category 5

Waste generated in operations

0.04 (0.0%)

Emissions associated with transporting and processing
waste produced by our company*6

Category 6

Business travel 4.0(0.1%)

Emissions associated with employee business travel*7

Category 7

Employee commuting

 2.9(0.1%)

Category 8

Upstream leased assets

Emissions associated with employees commuting toand from their workplaces*8
Emissions associated with operation of leased assets
hired by our company (Calculated by Mitsubishi Electric
under Scope 1 and Scope 2)

Category 9

Downstream transportation anddistribution

0.7(0.0%)

Emissions associated with the transportation, storage,
cargo handling and retailing of products

Category 10

Processing of said products

0.2(0.0%)

Emissions associated with the processing of interim
products by business operators

Category 11

Use of said products

Category 12

End-of-life treatment of said
products

3.0

Category 13

Downstream leased assets

0.01 (0.0%)

Category 14

Franchises-

Category 15

Investments

8.0

Total

-

 3,736 (82%)(0.1%)

Emissions associated with the use of products by users(consumers/business operators)
Emissions associated with the transportation andprocessing of products for disposal by users(consumers/business operators)
Emissions associated with operation of leased assets
Emissions at companies operating as franchises(Not applicable to Mitsubishi Electric)(0 .2%)

Emissions associated with operation of investments

4,543*1 Excerpt from Basic Guidelines published by the Japanese Ministry of the Environment and*5 CO 2 emissions associated with product distribution/circulation (sales
Ministry of Economy, Trade and Industry
distribution) Subject to accounting: 55 companies (production sites)*2 CO2, SF6, PFC, and HFC emissions associated with the use of gas, heavy oil, etc., and with product *6 CO 2 emissions associated with transportation of waste (waste distribution)
manufacturing
Subject to accounting: Mitsubishi Electric*3 CO2 emissions associated with the use of electricity, etc.
*7 Results for Japan. Excludes CO 2 emissions associated with actual use of taxis*4 Excludes some regions
and accommodation*8 Assuming that all employees use passenger rail services

Asia Pacific: Mitsubishi Electric Group, Environmental Performance Review 2018, p. 8

The Task Force on Climate-related Financial Disclosures

30

Agriculture, Food, and Forest Products
AI Review Summary
The AI reviewed disclosures from 166 agriculture, food, and forest products companies in four
categories: beverages, packaged foods and meats, agriculture, and paper and forest products.
The agriculture, food, and forest products companies ranged in size from about $94 billion to $70
million in annual revenue, with a median annual revenue of nearly $900 million. The AI review
results for agriculture, food, and forest products companies are shown in Figure 30.
In 2018 reporting, the 166 agriculture, food, and forest products companies most often disclosed
information aligned with the TCFD recommended disclosures Strategy b) and Metrics and Targetsa), while the lowest percentage of disclosures related to Strategy c), consistent with the overall
review results. There was a 15% increase in disclosure of Strategy b), impact of climate-relatedrisks and opportunities, between 2016 and 2018. However, disclosure of Governance a) increased
only 2% over the same time period, with a slight decrease in 2017. Overall a smaller percentage of
agriculture, food, and forest products companies disclosed relevant information than the average
across all industries for all 11 recommended disclosures.

Figure 30

A
Introduction

Agriculture, Food, and Forest Products Review Results by Year

B
State of Climate-Related
Financial Disclosures

Recommendation Recommended
Disclosure% Change
2016-2018

Percent of Companies that Disclose Information Aligned with
TCFD Recommended Disclosures

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Legend:Percentage of total population that disclosed information aligned with TCFD recommended disclosures in 2018

The Task Force on Climate-related Financial Disclosures

31

Examples of Disclosure Aligned with TCFD Recommendations: Agriculture, Food, and Forest
Products
Governance Recommendation
Governance a) asks companies to describe the board’s oversight of climate-related risks andopportunities. Figure 31 provides a food company’s description of board oversight.
Figure 31

Excerpt from Sustainability Report
Environmental management
At board level, the risk and sustainability committee provides strategic guidance and leadership on climatechange and environmental issues, and oversees implementation and revision of our environmental policy.
Operational execution of the strategy and management of the environmental system rests with the groupmanufacturing excellence department.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Our environmental policy statement was approved three years ago. In it, we commit to identifying environmental
and climate-change risks, taking action to address weaknesses, forging strong relationships with relevant
stakeholders, developing and implementing a sustainability strategy, striving for continuous improvement, andreporting to the board through relevant committees. We also commit to set targets, and monitor, measure andreport on our environmental scorecard against key performance indicators. The policy statement is available on
the Tiger Brands intranet and website. Our manufacturing and distribution operations will conduct policy training
for all relevant employees and suppliers.
Middle East and Africa: Tiger Brands Limited, Sustainable Development Report 2018, p. 18

Risk Management Recommendation
Risk Management b) asks companies to describe their processes for managing climate-relatedrisks. Figure 32 provides a food company’s description of how it manages climate-related risks.

Figure 32

Excerpt from Annual and Sustainability Report
Climate change GRI 103|201, 201-2

F
Initiatives Supporting
TCFD

Climate change can significantly impact global supply and demand for agricultural commodities,
affecting prices and, thereby, our stocks of raw materials, in addition to affecting energy safety andavailability of water.

Appendices

To become a benchmark for environmental efficiency initiatives and monitoring of climate risks that
affect the acquisition of raw materials and our industrial processes. Expand the capability toanticipate and create a system to adapt to environmental and climate transformations.
We monitor the entire production chain attempting to anticipate impacts on operating costs andavailability of grains. To this end, we manage opportunities combining market strategies andclimate monitoring in the main grain producing countries in the world. We also prioritize risks andopportunities arising from climate change, evaluating the potential financial impact, considering
those with greatest influence.
South America: BRF S.A., Annual and Sustainability Report 2017, p. 31

The Task Force on Climate-related Financial Disclosures32

Metrics and Targets Recommendation
Metrics and Targets c) asks companies to describe the targets they use to manage climate-relatedrisks and opportunities and performance against targets. Figure 33 provides a food and agribusiness company’s climate-related targets.

Figure 33

Excerpt from Annual and Sustainability Report
Progress against 2016 – 2020
Natural Capital goals

Goal

Material Area:
Climate Action
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

2018 achievements

Read more

New target:

Science based targets developed

By 2030, reduce greenhouse gas (GHG)
emissions by 50% both in own operations
and third party supply chains. Requires
reduction of 3.85% per year

2% GHG intensity improvement for Tier 1
processing operations

Almonds –page 55

Increased energy efficiency

9% increase in plantation and farming GHG
emission intensity

Tomatoesand Spices –page 58

5% increase in carbon sequestered in farming
and plantation operations

Coffee –page 61

GHG footprint calculator developed for
AtSource supply chains

Palm – page67

Our progress: on target
Avoided GHG emissions
By 2020, all Olam farms, plantations andTier 1 facilities to have implemented their2020 GHG reduction plans:

Energy strategy developed to focus on 20
plants contributing 80% of Tier 1 processing
emissions

1. Operational efficiency
2. Avoid High Carbon Stocks for landdevelopment
3. Climate-Smart Agricultural practices.

Climate-Smart operational plans in place at allplantations and farms

Palm –
page 67

Our progress: on target

Increased share of renewable energy
By 2020, 25% of energy derived fromrenewable and biomass sources at Olam’sTier 1 facilities (from 2015 baseline – 15%).

F
Initiatives Supporting
TCFD

11% of energy derived from biomass andrenewables

Almonds –page 55

Decrease due to lower quantity of bagasse
available from lower sugar cane production in2017 and reduced consumption of rice husk
due to brown rice production
Cocoa shell boiler implementation plans inplace for 2020
Power Purchase Agreement implemented forAustralian Almonds
Our progress: behind target

Appendices

Reduced agricultural vulnerability to climate risks for farmers and Olam-managed plantations, concessions
and farms
By 2020, implement the Olam 2020 Climate- Increased implementation of CSA practices
e.g. 11% increase in CSA training and 70%
Smart Agriculture (CSA) Programme.
increase in conservation training
Climate resilience plan in development, to becompleted in 2019.
Our progress: behind target

Cocoa –
page 63
SRP rice
farmer video
on methane1
Cotton –page 72

1. Rice farmer video on methane: https://www.olamgroup.com/products/food-staples/rice/rice-sustainability.html

Asia Pacific: Olam International, Olam International Limited Annual Report 2018, p. 94

The Task Force on Climate-related Financial Disclosures

33

Technology and MediaAI Review Summary
The AI reviewed disclosures from 63 technology and media companies in two categories:
technology hardware and equipment, and interactive media and services. The technology andmedia companies ranged in size from about $50 billion to $12 million in annual revenue, with a
median annual revenue of nearly $3 billion. The AI review results for technology and media
companies are shown in Figure 34.
Overall, in 2018 reporting, the 63 technology and media companies most often disclosed
information aligned with the TCFD recommended disclosure Strategy a) while the lowest
percentage of disclosures related to Strategy c)—slightly decreasing between 2016 and 2018.
There was a notable 12% increase in disclosure of Metrics and Targets a), climate-related metrics,
between 2016 and 2018. However, disclosure of Governance a) increased only 2% over the sametime period, with a slight decrease in 2017. Overall a smaller percentage of technology and media
companies disclosed relevant information than the average across all industries for all 11
recommended disclosures.

Figure 34

A
Introduction

Technology and Media Review Results by Year

B
State of Climate-Related
Financial Disclosures

Recommendation Recommended
Disclosure% Change
2016-2018

Percent of Companies that Disclose Information Aligned with
TCFD Recommended Disclosures

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Legend:Percentage of total population that disclosed information aligned with TCFD recommended disclosures in 2018

The Task Force on Climate-related Financial Disclosures

34

Examples of Disclosure Aligned with TCFD Recommendations: Technology and Media
Strategy and Risk Management Recommendations
Strategy a) asks companies to describe the climate-related risks and opportunities they haveidentified, and Risk Management b) asks companies to describe their processes for managing
climate-related risks. Figure 35 provides a publishing company’s description of its main risks andmitigation measures related to environmental matters, including climate change.

Figure 35

Excerpt from Annual Report
Risks connected with environmental matters

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Climate change is a major issue for all industries,
and no less so for publishing. In the publishingsector, greenhouse gas emissions are mainly
connected with energy consumption,transportation (for distribution and logistics
operations, for instance, or for business travel)
and the production cycle for paper products.
Growing concern on the part of stakeholders

and institutions over climate change could lead toreforms, in the future, to current legislative
provisions governing emissions.
Alongside the risks connected with climate-

Main risks

Mitigation measures

Growing pressure from stakeholders and national
and international institutions with regard toclimate change.

Constant oversight of the issue through thecontinuous monitoring of overall greenhouse gas
emissions produced by the various operations of
the Group (such as product distribution andlogistics and business travel) and the identificationof useful actions to reduce them.

Loss of opportunities for economic benefits due toa reduced effectiveness of energy efficiency
measures.

Constant oversight of the issue through thecontinuous monitoring of overall energy
consumption, strong focus on the upgrading of IT
equipment and the identification of energy
efficiency measures in workplaces.

Interruptions in the production process due to thescarcity of paper as a raw material.

Progressive extension across the Group of the useof FSC and PEFC certified paper.

changing emissions are the risks connected withenergy efficiency, which if low could adversely
affect economic benefits, and the risks connectedwith potential interruptions in paper supply.

Europe: Gruppo Mondadori, 2018 Annual Report, p. 88

Appendices

The Task Force on Climate-related Financial Disclosures

35

Strategy Recommendation
Strategy a) asks companies to describe the organization’s climate-related risks and opportunities.
Figure 36 provides a diversified technology company’s description of its climate-related issues.

Figure 36

Excerpt from Integrated Report
Engaging with Climate-Related Risks and Opportunities[…] As regards climate-related risks and opportunities, Hitachi is reviewing its risks in two
categories, namely, (1) risks related to the transition to a low-carbon economy, and (2) risks related
to the physical impact of climate change in accordance with the categories outlined in the new
global TCFD recommendations. In terms of opportunities, we are positioning our contributions to thecreation of a low-carbon society through enhanced energy-saving features of our products andservices as a major opportunity, and are discussing how we can further expand it.
Risks in Transition to a Low-Carbon Economy
Policy and Legal
Carbon taxes, energy consumption taxes, emissions trading
systems, and other measures may be newly introduced or
further strengthened, representing risks impacting directlyon management costs in addition to those incurred incomplying with environmental regulations and policies ofcountries and regions around the world.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

To mitigate such risks, we have been reducing or
minimizing cost burdens by enhancing production efficiency
and introducing energy-saving measures. In fiscal 2017, ourenergy-saving investments totaled approximately 5.4 billion
yen. Should our products fail to meet energy-efficiency
standards and regulations, we will risk losing sales
opportunities. In addition to strictly complying with existing
standards and regulations, we will always endeavor to keep
abreast of trends in laws and regulations and participate in
the planning of new policies.
Technology
To reduce CO2 emissions caused by the use of our products
and services by our customers, which make a significant
share of emissions in the value chain, we need newtechnology to achieve further energy-saving in our products
and services.
Therefore, by applying Environmentally Conscious Design
Assessments in the design and development stages ofHitachi products and service, we assess various
environmental aspects at each stage of the product life
cycle and strive to minimize environmental impact. In
addition, by combining Hitachi’s longstanding expertise in awide range of social infrastructure technologies with OT(operational technology) and IT, we can provide optimal
solutions that lead to the creation of new business
opportunities.
Market and Reputation
A company’s approach to climate change issues influences
stakeholders’ evaluations, and changes to market values,
such as placing great importance on climate change
countermeasures, affects customers’ choice of products andservices. This may pose a risk to business continuity.
Hitachi upholds long-term environmental targets of reducing
CO2 emissions throughout its value chain by 50% in fiscal
2030 and 80% in fiscal 2050 compared to fiscal 2010 levels.
Measures to attain these goals include investing in new
facilities and equipment with higher energy efficiency andtargeting greater efficiency in production throughdigitalization.

Risks Related to the Physical Impacts of
Climate Change
Acute and Chronic
Climate-related physical risks include acute risks, such asincreased severity of typhoons and floods, and chronicrisks, including climate patterns that may cause the sea
level to rise and chronic heat waves. Hitachi has aworldwide business presence and believes that disasters
due to weather phenomena attributed to climate change,such as increasingly bigger typhoons and torrential rain,pose a risk to business continuity.
In order to minimize these risks, we take into considerationsuch factors as location and the possibility of damage fromfloods when setting up a new plant or deciding on the
deployment of equipment. We also use the Hitachi Group
Guidelines for Developing Business Continuity Plans thatoutline measures to be taken in terms of disaster to mitigate
risks.

Climate-Related Opportunities
Resource Efficiency
Hitachi is promoting the efficient use of resources byreducing waste, recycling, and undertaking other measures.
Also, for the efficient and sustainable use of natural
resources, we are promoting efforts to minimize the amountof natural resources we use through improvements in
production processes and resource-conserving designs.
Energy Source
Hitachi proactively uses renewable energy for our factories
and offices. In our factories, we are able to efficiently use
the electricity supplied from photovoltaic power generation
facilities, despite fluctuations in the amount of power
generated, by monitoring and controlling energy usage on
production lines and by using storage batteries. Also, weare promoting the adoption of renewable energy credits andthe expanded deployment of internal carbon pricing and theself-consumption solar power generation. In our offices, too,
as well as visualizing energy usage and optimizing theamount of energy used in the building as w hole throughBuilding and Energy Management Systems (BEMS).* In ourbusiness operations, we create business opportunities, suchas by actively providing renewable energy from wind power
generation systems.
[…]* BEMS aims to optimize the internal environment of a building and its
energy efficiency.

Asia-Pacific: Hitachi, Ltd., Hitachi Integrated Report 2018, pp. 46-47
Note: some content, denoted by “[…],” was deleted in order to fit the page

The Task Force on Climate-related Financial Disclosures

36

Risk Management Recommendation
Risk Management a) asks companies to describe their processes for identifying and assessing
climate-related risks. Figure 37 provides a technology company’s description of its process for
identifying and assessing sustainability issues, which includes climate-related issues.

Figure 37

Excerpt from Sustainability Report
CLIMATE CHANGE RISK/OPPORTUNITIES MANAGEMENTClimate change risks and opportunities are identified and evaluated as part of two processes within Lenovo’s business
management systems: our global annual risk registration process and our annual environmental significant aspect
evaluation. These two processes are connected, meaning that if climate change risks are identified in the global risk
registration, they are considered in the environmental aspects analysis — and vice versa.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

1.

Among other sustainability factors, Lenovo’s formal risk management process includes: environmental risk
categories such as environmental incidents, catastrophic weather conditions, supply chain disruptions and otherelements. Each business unit is required to identify risks and assess their impacts on Lenovo’s strategy execution,then develop mitigation plans for select identified risks. This process is managed by Lenovo’s Enterprise Risk
Management team.

2.

We also evaluate climate change risks; the results of this evaluation are considered in the annual risk registration
process described above. Energy consumption, the associated greenhouse gas emissions and climate change are
identified as significant environmental aspects and impacts for Lenovo. As such, associated risks and opportunities
are evaluated and prioritized annually based on Lenovo’s significant aspect methodology in accordance with therequirements of our environmental management system. Per these requirements, climate change is evaluatedrelative to its actual and potential influence on the environment and the business. This process is managed by
Lenovo’s Global Environmental Affairs team.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

As a demonstration of Lenovo’s long-term approach to risk management in this area, in May 2014, Lenovo’s Board of
Directors (BOD) and Executive Committee (LEC) acted to increase Lenovo’s GHG emissions reduction commitment from
20 percent to 40 percent by FY 2019/20, relative to FY 2009/10 (see graphic above). We will meet this commitment
through investment in on-site renewable generation, energy efficiency and renewable energy credits or offsets. We arepreparing to identify and develop our third-generation targets after 2020. We are reviewing and evaluating Science Based
Targets Initiative’s methodology to determine the best approach for Lenovo that will align with the science based reduction
pathways for limiting global temperature rise. Lenovo’s commitment to addressing climate change extends to supporting
global initiatives such as We Mean Business, a coalition of businesses and investors supporting a transition to a low
carbon economy.

Asia-Pacific: Lenovo Group Ltd., 2017/18 Sustainability Report, pp. 75-76

The Task Force on Climate-related Financial Disclosures37

Consumer Goods
AI Review Summary
The AI reviewed disclosures from 82 consumer goods companies in two categories: consumer
retailing and textiles and apparel. The consumer goods companies ranged in size from about$120 billion to $800 million in annual revenue, with a median annual revenue of over $12 billion.
The AI review results for consumer goods companies are shown in Figure 38.
In 2018 reporting, over half of the 82 consumer goods companies disclosed information alignedwith the TCFD recommended disclosure Metrics and Targets a), climate-related metrics, while thelowest percentage of companies disclosed information in alignment with Strategy c), resilience ofthe company’s strategy. There was a notable 18% increase in disclosure of Strategy a), climaterelated risks and opportunities, between 2016 and 2018. However, there was no increase in thepercentage of disclosure for information aligned with Risk Management a) over the same time
period, although there was a slight decrease in 2017. When compared to the average across allindustries, a higher percentage of consumer goods companies disclosed information aligned witheight of the 11 recommended disclosures.
Figure 38

A
Introduction

Consumer Goods Review Results by Year

B
State of Climate-Related
Financial Disclosures

Recommendation Recommended
Disclosure% Change
2016-2018

Percent of Companies that Disclose Information Aligned with
TCFD Recommended Disclosures

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Legend:Percentage of all companies that disclosed information aligned with TCFD recommended disclosures in 2018

The Task Force on Climate-related Financial Disclosures

38

Examples of Disclosure Aligned with TCFD Recommendations: Consumer Goods
Governance Recommendation
Governance a) asks companies to describe the board’s oversight of climate-related risks andopportunities. Figure 39 provides a retail company’s description of its board-level governance ofclimate-related issues.
Figure 39

Excerpt from Sustainability Report
Climate change governance
Woolworths Group considers climate change to be a critical, board-level strategic issue. The Board
Sustainability Committee oversees our Group-level response to climate change risks and opportunities.
Climate change forms part of our sustainability strategy, progress on which is reported to the Board
Sustainability Committee on a quarterly basis.
Management has primary responsibility for assessing and managing climate-related risks and opportunities
as part of our enterprise risk management process. The Woolworths Facilities Management team is
responsible for the energy efficiency and greenhouse gas emissions of our own operations, and manage
our board-endorsed energy strategy targeting supply, demand and innovation opportunities to reduce ourcarbon emissions.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Asia Pacific: Woolworths Group, 2018 Sustainability Report, p. 34

Risk Management Recommendation
Risk Management b) asks companies to describe their processes for managing climate-relatedrisks. Figure 40 provides a consumer goods company’s disclosure of its process.
Figure 40

Excerpt from Annual and Sustainability Report
THE MAIN FINANCIAL, SOCIAL AND ENVIRONMENTAL RISKS*IDENTIFIED AND MONITOREDCATEGORY

TYPES DEFINITIONMITIGATION METHODSOCIAL AND
ENVIRONMENTAL RISKS

ClimateChangeWe monitor the environmental impacts from direct(industrial, logistics and shipping) operations andtaking steps to minimize the impact of theCompany’s own and its suppliers’ operations.
Monitoring involves taking a global inventory of
direct and indirect GHG emissions using theinternational GHG Protocol methodology. The
results of the inventory are published annually on
the CDP platform. JBS also monitors indicators
representing the volume of water and electricity
used by its operations in order to optimize
production processes and gradually reduce
consumption. To reduce the impact from JBS
operations and create opportunities, the Company
has an annual plan to invest in environmental
improvements to optimize use of natural
resources, water and waste energy recycling andaddress other issues.

Climate change could
have a negative impact
on the Company’sbusinesses. Resources
like water, electricity
and animal feed (which
is dependent on
farming) are critical for
production of raw
materials (cattle,
poultry, pork andlamb).
Businesses could also
be affected by new
legislation andregulation in this area.

*All potential risk factors the Company is aware of are detailed in sections 4 and 5 of the JBS S/A Reference Form, available at
http://jbss.infoinvest.com.br/ptb/4896/80775.pdf

South America: JBS S.A., 2018 Annual and Sustainability Report, pp. 32-33

The Task Force on Climate-related Financial Disclosures39

Metrics and Targets Recommendation
Metrics and Targets c) asks companies to describe the targets they use to manage climate-relatedrisks and opportunities and performance against targets. Figure 41 provides a home appliancemanufacturing company’s assessment of progress against one of its targets, the reduction in CO2emissions.

Figure 41

Excerpt from Sustainability Report
Our targets
Our 50% climate target – halve the Group's climate impact, preventing the release of 25
million metric tons of carbon dioxide and its equivalents (CO2e) over 15 years - between 2005
and 2020. The target focus on product efficiency in the main product categories. Sales volumes
and emission factors are normalized to 2005.
[…]

Progress on our 50% target

A
Introduction
B
State of Climate-Related
Financial Disclosures

By the end of 2018, we had cut our CO2 emissions by 31% compared to 2005 - toward our 50%
target by 2020.

Climate targets 2020 1)

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFDl) Reduce CO2 impact by 50% in 2020 focusing on product efficiency in the main product categories. Sales volumes and emission factors are normalized to 2005.

Appendices

Europe: Electrolux AB, 2018 Sustainability Report, pp. 29-30
Note: some content, denoted by “[…],” was deleted in order to fit the page

The Task Force on Climate-related Financial Disclosures404. TCFD-Aligned Reporting by Asset Managers and Asset Owners
As noted previously, asset managers and asset owners were excluded from the AI review
because, in many cases, the types of reports needed for analysis are not publicly available. In its
2017 report, the Task Force recommended that companies provide climate-related financial
disclosures in their public annual financial filings (or other publicly available corporate reporting).
However, the Task Force recognized comparable reporting by asset managers and asset owners
to their clients and beneficiaries, respectively, would usually occur in other types of financial
reporting and may not be publicly available. As a result, the Task Force determined to exclude
asset managers and asset owners from the AI review given the lack of a consistent set of public
reports in the two industries.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

To provide some insight on climate-related
financial reporting by asset managers and asset
owners, the Task Force reviewed aggregatedreporting results of signatories to the Principles
for Responsible Investment (PRI). PRI signatories
are required to report on their responsible
investment activities on an annual basis (seeFigure 42 for more information on PRI).22 In late2017, PRI integrated several climate-related
indicators based on the TCFD recommendations
into its 2018 reporting framework. The PRI madethe climate-related indicators voluntary to reportand voluntary to disclose and did not include
those indicators in the PRI signatories’
assessment scores.

Figure 42

About PRI works with its international network of
The PRI
signatories to put its six Principles for
Responsible Investment into practice. Its goals
are to understand the investment implicationsof environmental, social, and governance(ESG) issues and support signatories in
integrating these issues into investment andownership decisions.
The six Principles for Responsible Investment
are a voluntary and aspirational set ofprinciples that describe actions forincorporating ESG issues into investment
practice.
Currently there are over 2,360, PRI signatories
representing $89 trillion in assets.

The Task Force mapped PRI’s climate-related andother indicators to its 11 recommended
disclosures, and the aggregated results for both asset managers (referred to as investment
managers by the PRI) and asset owners are shown in Figure 43 (p. 42) and Figure 44 (p. 42),
respectively. It is important to note that a single PRI indicator was mapped to Risk Management a)and to Risk Management b), which is why those two recommended disclosures are combined.23
The percentages included in these figures is based on aggregated 2018 reporting results of 1,449
PRI signatories—of which 1,111 are asset managers and 338 are asset owners. About one third(480) of 2018 reporting PRI signatories provided information on at least one of the PRI indicatorsthat aligned with the TCFD recommended disclosures. Of these 480 signatories, 349 were asset
managers and 131 were asset owners, with the majority in Europe.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

As shown in Figure 43 (p. 42), the highest levels of reporting for asset manager signatories was
information on their risk management processes for identifying, assessing, and managing
climate-related risks which relates to Risk Management a) and Risk Management b) under the Task
Force’s Risk Management recommendation. This was closely followed by reporting on theorganization’s consideration of climate change issues as possible investment risks andopportunities, which was mapped to Strategy a). The Strategy c) recommended disclosure had thelowest response rate, with 4% describing the resilience of their organization’s strategy,
considering different climate-related scenarios.

Appendices22
23

PRI, Annual Report 2018, August 14, 2018, p. 92.
PRI indicator SG 14.7 CC asks signatories to “[d]escribe [their] risk management processes for identifying, assessing, and managing climaterelated risks” whereas the TCFD's Risk Management a) asks organizations to describe processes for identifying and assessing climate-relatedrisks and Risk Management b) asks organizations to describe processes for managing climate-related risks.

The Task Force on Climate-related Financial Disclosures41

Figure 43

PRI Signatories with TCFD-Aligned Reporting: Asset Managers

Base size (Asset Managers): 1,111
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis

For the asset owner signatories, the highest levels of reporting related to Strategy a) under the
TCFD recommendations (see Figure 44). Similar to asset managers, the lowest response rate forasset owners was for the Strategy c) recommended disclosure at 9%. Overall, among the 2018
reporting PRI signatories, a larger percentage of asset owners than asset managers reported
information aligned with the 11 TCFD recommended disclosures.

Figure 44

PRI Signatories with TCFD-Aligned Reporting: Asset Owners

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesBase size (Asset Owners): 338

Similar to Section B.3. Climate-Related Financial Disclosures for Select Industries 2016-2018, thissection includes examples of reporting by asset managers and asset owners to provide additional
insight on current practices.

The Task Force on Climate-related Financial Disclosures

42

Examples of Disclosure Aligned with TCFD Recommendations: Asset Manager
Strategy Recommendation
Strategy b) asks companies to describe the impact of climate-related risks and opportunities on
their businesses, strategy, and financial planning. For asset managers, the Task Force asks themto describe how climate-related issues are factored into relevant products or investment
strategies. Figure 45 provides an asset manager’s description of this.
Figure 45

Excerpt from Transparency Report
SG 01.3b CCDescribe how climate-related risks and opportunities are factored into your investment strategies
or products.

We factor climate-related risks and strategies into our investment strategies or products.
We have a formal comprehensive and integrated approach to manage our exposure to carbon
risks and access opportunities from the transition to a low-carbon economy. Over the last three
years, we have reviewed and refined our approach and continued to implement it across ourinvestment and stewardship activities, taking account of the specific challenges faced by each
investment strategy and different asset classes and learning from our experiences and industry
best practice.

A
Introduction
B
State of Climate-Related
Financial Disclosures

The carbon risk and opportunities management activities we are implementing cover our public
equities and credit, private real estate and infrastructure assets, representing $41bn AUM as of 31
Dec 2017, or 91.5% of our AUM.
Our approach has four elements:

C
Adoption and Use of the
TCFD Recommendations

Awareness: Portfolio managers are aware of the carbon risks in their portfolios, whichinvestments are the largest contributors, and what are the associated risks and mitigation
strategies.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis

Integration: Portfolio managers integrate carbon risk considerations alongside other value andrisk considerations, exploiting green investment opportunities or divesting where carbon risk
alongside other factors impacts value.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Engagement: We act as engaged stewards of the investments we manage or represent on behalfof our clients. Where we hold assets with significant carbon risk exposure, we will manage directly
owned assets, and engage with public and private companies, to mitigate the carbon risk.
Advocacy: We engage with public policymakers and sector organisations, nationally andinternationally, to encourage policy or best practice that facilitates the transition to a low-carbon
economy.
Across private markets, infrastructure, real estate and private equity, our strategies have agovernance structure and cover sectors that lend themselves more naturally to innovative
opportunities arising from the low-carbon transition. We use our rights and leverage as owners or
shareholders of those assets and companies in which we are invested to influence practice andstrategy.
[…]
Going forward, we have initiated an internal working group looking at carbon risk and opportunity
management, including 2-degree scenario planning. We aim to strengthen our internal
understanding and further our analysis of carbon risks monitoring and reporting implications.
Importantly, the internal discussions focus on how to implement 2-degree scenario planning andstress testing in ways that are meaningful for our investment processes across different asset
classes. We will amend our carbon risk and opportunity approach and targets on the basis of ourfindings. We are confident that by expanding the work we already carry out in measuring carbon
risk to include scenario analysis will help us, other investors and the assets themselves
understand much better the scale of the carbon opportunity and more specifically on how todeliver on it.
Europe: Hermes Investment Management, RI Transparency Report 2018, pp. 21-22
Note: some content, denoted by “[…],” was deleted in order to fit the page

The Task Force on Climate-related Financial Disclosures

43

Risk Management Recommendation
Risk Management a) asks companies to describe their processes for identifying and assessing
climate-related risks. Figure 46 provides a description of an asset manager’s risk identification andassessment process.

Figure 46

Excerpt from TCFD Report
PROCESSES FOR IDENTIFYING AND ASSESSING CLIMATE-RELATED RISKS
Climate-related risks can be identified at the level of a company, sector, country or the entire
market. To systematically assess such risks, we utilise a multi-layered process, depicted below.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

LGIM engages directly with companies and policymakers globally to ensure that the market transitions to a
low-carbon economy in an orderly manner. The first step is identifying the industries which contribute themost to global greenhouse gas emissions and therefore require urgent action.
Global greenhouse gas emissions by sector

Climate Impact Pledge

Sectors
Other energy
10%Electricity andEnergy (oil & gas, mining, utilities), transport,
finance and agriculture

heat production

25%

Industry

F
Initiatives Supporting
TCFD

21%

AppendicesTransportationand other land use

14%

24%

Companies
Largest in each sector
Agriculture, forestry

Direct engagement with consequences
Buildings
6%
Source: IPCC, 2014

Beginning with the biggest contributors to global greenhouse gas emissions (left side of chart), we focusedon sectors which need particular attention from the point of view of protecting overall market returns.
These are energy (namely oil and gas, utilties and mining), transport (automobile manufacturers) andfinance and food retail (two sectors which are not always discussed in a climate context). Agriculture is asignificant source of emissions, but is often overlooked due to the low levels of direct exposure by
investors. We put the onus on food retailers to address this issue from a supply chain perspective. Further
detail on this engagement programme is explained in the next section.
Europe: Legal & General Investment Management, Task Force on Climate-related Financial Disclosures
Report 2018, pp. 22-23

The Task Force on Climate-related Financial Disclosures

44

Risk Management Recommendation
Risk Management b) asks companies to describe their processes for managing climate-relatedrisks. Figure 47 provides part of a diversified financial institution’s disclosure of its risk
management related to climate change, and Box 1 describes how the asset managementbusiness has applied the institution’s risk management approach to its activities.
Figure 47

Excerpt from Financial Filing
Risk management related to climate change
Since the November 2015 Paris Agreement, the BNP Paribas Group has taken a number of steps
to integrate climate change risk management and to support energy transition in line with the 2°C
trajectory.
The Group has strengthened its sectoral policy on coal so that it no longer finances the extractionof coal, whether via mining projects or via specialised coal mining companies without adiversification strategy, as well as coal-based power plant projects.
Europe: BNP Paribas, 2018 Registration Document and Annual Financial Report, p. 106
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Box 1

Using Scenarios to Align Investment Policy with Paris Agreement
In 2015, BNP Paribas committed to ensuring that its financing and investment activities in the energy
sector would evolve in line with the objectives of the Paris Agreement to keep global warming
significantly below the 2°C threshold. According to the International Energy Agency’s (IEA) in its
Sustainable Development Scenario (SDS), almost all of the emissions reductions from the energy sector
required to achieve this—2.8Gt out of a total 3Gt—come from cutting back on the use of coal in power
generation.1,2Using this scenario and the related emissions pathways as a guide, BNP Paribas Asset Management(BNPP AM) recently implemented an enhanced coal policy, addressing companies engaged in mining
thermal coal and generating electricity from coal.3,4,5 Power generators whose carbon intensity is above
the 2017 global average of 491 gCO2/kWh will be excluded, with BNPP AM subsequently following theParis-compliant trajectory for the sector as determined by the IEA SDS, which requires power generators’
carbon intensity to fall to 327 gCO2/kWh by 2025.
1. See IEA, Power: Tracking Clean Energy Progress, © 2019 OECD/IEA. Note that the Paris Agreement (Article 2a) commits its signatories to:“Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit thetemperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climatechange.” The IEA’s 2018 World Energy Outlook states (p.89): “The CO2 emissions trajectory to 2040 in the Sustainable Development
Scenario is lower than most published decarbonisation scenarios based on limiting the long-term global average temperature rise to 1.71.8°C above pre-industrial levels.” Ideally, we would like to see the IEA publish and regularly update a 1.5°C scenario and to adopt a more
precautionary stance with regard to negative emissions technologies in its modelling, but the SDS is without doubt the most widelyreferenced Paris-compliant scenario for the global energy industry, and as such the clearest reference point for governments, companies,
and investors concerned with aligning energy emissions with the Paris Agreement.
2. According to the most recent iteration of the SDS set out in the IEA’s 2018 World Energy Outlook, CO 2 emissions from energy need to fallby 3.1Gt by 2025 versus 2017 levels, and all of this 3.1Gt reduction comes from lower emissions from coal (emissions from natural gas areslightly higher in 2025 versus 2017 levels, and emissions from oil only slightly lower). Moreover, nearly all of this reduction in coalemissions - 2.83Gt of the total 3.1Gt required, or 93% - comes from the power sector.
3. The full policy is available here: http://institutional.bnpparibas-am.com/divesting-coal-new-policy/.
4. The new policy does not cover metallurgical coal as there are currently no viable alternatives to metallurgical coal in the steel-making
process. By contrast, there are many cleaner alternatives to thermal coal for producing electricity.
5. This policy will come into effect in 2020 and apply to all of BNPP AM’s actively managed open-ended funds, as well as becoming thedefault policy for segregated mandates.

The Task Force on Climate-related Financial Disclosures

45

Examples of Disclosure Aligned with TCFD Recommendations: Asset Owner
Governance Recommendation
Governance a) asks companies to describe the board’s oversight of climate-related risks andopportunities, and Governance b) asks companies to describe management’s role in assessing andmanaging climate-related risks and opportunities. Figure 48 provides a pension plan’s descriptionof its board’s oversight and management’s role to evaluate climate-related risks andopportunities.
Figure 48

Excerpt from Report on Sustainable Investing

Implementation of the
Task Force’s recommendations

A
Introduction

Governance

B
State of Climate-Related
Financial Disclosures

Disclose the organization’s governance around climate-related risks and opportunities.
a)

Describe the board’s oversight of climate-related risks and opportunities

C
Adoption and Use of the
TCFD Recommendationsb)

Describe management’s role in assessing and managing climate-related risks andD
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

opportunities
The Board oversees CPPIB's efforts to understand and manage climate-related risks andopportunities. They receive updates about broad trends and specific investment-related
developments via ongoing risk reporting and approve our overall risk appetite and risk policy,
including the integration of ESG factors and climate change specifically.
Our CEO sets the tone and establishes the overall risk culture. The Head of Sustainable Investing
provides the Board with updates on our sustainable investing activities (see page 9 for ourIntegrated Sustainable Investment Framework).
In July 2017, Neil Beaumont joined as CPPIB’s Chief Financial and Risk Officer (CFRO). The CFRO
has explicit accountability to oversee and enhance the risk management framework and toensure it is appropriate given CPPIB’s unique mandate and risk profile. The CFRO is working
closely with the new ad hoc Risk Committee of the Board to advise management and the Boardon the evolution of our risk management practices. He also sponsors CPPIB’s climate change
initiative, overseeing the Climate Change Steering Committee, which, along with the Climate
Change Project Management Office, guides our climate-related efforts. (For more on the Climate
Change Steering Committee and Climate Change Project Management Office (see page 14).
North America: CPP Investment Board (CPPIB), 2018 Report on Sustainable Investing, p. 59

The Task Force on Climate-related Financial Disclosures46

Strategy Recommendation
Strategy b) asks companies to describe the impact of climate-related risks and opportunities on
their businesses, strategy, and financial planning. For asset owners, the Task Force asked them todescribe how climate-related issues are factored into relevant products or investment strategies.
Figure 49 provides a pension fund’s disclosure of its consideration of climate-related issues.
Figure 49

Excerpt from Annual Financial Report
StrategyWith the transition to a low-carbon economy already underway and accelerating globally, and likely toaffect virtually every investment in the Fund’s broadly diversified portfolio, the Fund is developing
strategies to address both the risks and opportunities presented by climate change. However, key
drivers of climate risk assessment such as climate modeling, projections of energy demand,technological development, and regulations are in a state of flux. These factors will affect themagnitude and the timing of climate impacts on the Fund’s assets. The Fund has set a strategic priorityof evaluating the constantly shifting individual factors and the complex interaction among thosefactors to inform the Fund’s investment, engagement and public policy advocacy strategies.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesNorth America: New York State Common Retirement Fund, 2018 Comprehensive Annual Financial Report,
p. 91

Metrics and Targets Recommendation
Metrics and Targets b) asks companies to disclose Scope 1, Scope 2, and, if appropriate, Scope 3
GHG emissions. For asset owners, the Task Force asks them to disclose GHG emissions associatedwith their investments. Figure 50 provides a pension fund’s disclosure of such metrics.

Figure 50

Excerpt from Sustainability Report
Carbon footprint at portfolio level, Nordic equities, international equities and corporate bonds for 2018 (Enterprise Value)

Nordic equities
Scope 1
Scope 2
International equities
Scope 1
Scope 2
Corporate bonds
Scope 1
Scope 2

Carbon Footprint(tonnes CO2e/DKKm)
20.79
19.43
1.37
20.08
16.95
3.13
10.39
7.20

Carbon Intensity(tonnes CO2e/DKKm)
39.68
37.07
2.61
27.35
23.09
4.26
14.01
9.71

WACI
(tonnes CO2e/DKKm)
29.07
25.94
3.13
36.49
30.89
5.60
22.39
16.44

3.19

4.30

5.95

Europe: ATP, Responsibility 2018, p. 24

The Task Force on Climate-related Financial Disclosures47

ductionof Climate-Related
ncial Disclosurestion and Use of the
Recommendations

osure of Strategy
ence Using Scenario
sis

C Adoption and Useof the TCFD
Recommendations

Perspectives on
ion-Useful Climateed Financial
osurestives Supporting

ndicesThe Task Force on Climate-related Financial Disclosures

48

C. Adoption and Use of the TCFD Recommendations
This section summarizes the results of a survey on companies’ efforts to implement the TCFD
recommendations as well as users’ views on the usefulness of climate-related financial
disclosures for decision-making.24
The Task Force believes it is important to highlight the survey was primarily distributed toorganizations and individuals that signed up for updates on the Task Force’s website, whichmeans that most survey respondents were familiar with the Task Force’s work. In fact, 95% of
respondents indicated they were either somewhat familiar or very familiar with the TCFD
recommendations.

1. Scope and Approach
In November 2018, the Task Force issued a comprehensive survey to better understand the statusof implementation of the TCFD’s recommendations and associated challenges and to obtain views
from users of climate-related financial disclosures and others on the usefulness, availability, andquality of such disclosures. The Task Force structured the survey to direct respondents to specificquestions based on whether they are involved in preparing climate-related financial disclosures,
use them for decision-making, or have other interests in these disclosures.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis

The Task Force distributed the survey to over 3,000 companies and other organizations, resulting
in 485 responses.25,26 Half of the responses were from preparers and users of disclosures with theother half comprised of other interested parties, including non-governmental organizations(NGOs), consultants, industry associations, academia, the public sector, and stock exchanges.
Figure 51 shows the geographic distribution of the survey respondents, with 45% fromorganizations headquartered in Europe. The Task Force notes that the survey responses are
significantly lower in Latin America, Africa, and Asia (excluding Japan), which may potentiallyindicate greater challenges in adoption of the TCFD recommendations in these regions.
Figure 51

Geographic Distribution of Respondents

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Top 10 Countries by
Number of Respondents

45%
Europe24%

F
Initiatives Supporting
TCFD

North
America2%

Appendices3%

Middle East
and Africa

South
America

26%

Asia PacificUnited States

71

United Kingdom

61

Japan

55

Canada46

Australia

28

France27

Germany

20

Netherlands

19

Italy

15

Sweden14

In its survey, the Task Force used the term “climate-related disclosures” as a synonym for "climate-related financial disclosures."
The Task Force distributed the survey to individuals that signed up for updates on the Task Force’s website. The Task Force also sent the survey
to the following associations, requesting that they share the survey with their members: the Accounting for Sustainability Project, Beverage
Industry Environmental Roundtable, Business for Social Responsibility, Ceres, China-UK TCFD Pilot Group, Farm Animal Investment Risk &Return, Institutional Investors Group on Climate Change, International Council on Mining and Metals, Institute of International Finance, United
Nations Environment Programme Finance Initiative, World Business Council for Sustainable Development, and World Economic Forum.
26
The Task Force uses the term “organizations” when referring to a broad range of entity types.
24
25

The Task Force on Climate-related Financial Disclosures49Box 2 summarizes key demographic information on the survey respondents, including the typesof organizations that responded, the percent of survey respondents that were preparers, users,
or other types of organizations, and the composition of preparers and users in terms of whether
they represented financial or non-financial companies.
Box 2

TCFD Survey Respondent Demographics
Types of Respondents
The Task Force received 485 survey responses. Respondents identified themselves based on the optionthat most closely matched their functional perspective or organizational type.
Respondents by Functional Type

Respondents by Organization TypeUsers
46, 9%

Public Sector
6%

Other
3%

Assist others withproducing climaterelated disclosures

Academia
7%
Accounting Firm
2%

Work in public
sectorA
Introduction

Work for industry
association

Other
241, 50%

Preparers
198, 41%

Work for academic
institution

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

NonGovernmental
Organization
6%

Work for stock
exchange

Non-Financial
Industry
23%

Financial
Services
30%

Media
1%

Other

Consulting or
Data Analytics
18%

Industry Association
4%

Composition of Preparers and Users
About half of the respondents identified themselves as preparers or users of climate-related disclosures.
The Task Force asked these respondents to disclose their sector type, with 55% of preparers working fornon-financial companies. The charts at the bottom provide additional granularity by industry type.

$770B

Percentage of Respondents by Sector
Preparers

45%

Users

93%

Financial

55%

average asset size ofbanks and insurers

7%

Non-Financial

Base size (asked of Preparers and Users): 244

Financial Industries
Banking48

Asset Management

36

Insurance

20

Pension20

Other Financial
Export Credit

7
2

Total: 133

Non-Financial Industries
Materials
Industrials
Utilities
Oil & Gas
Consumer ProductsTechnology
Transportation
Healthcare
RetailReal Estate
Renewable Energy
Communications

1

2

3

4

6

9
9

The Task Force on Climate-related Financial Disclosures

12

15
15

17

18

Total: 111$118B
average AUM ofasset managers$114B

average assets owned byasset owners$30B

average annual revenue of
non-financial companies
These averages are based on a subset of the 244
respondents that identified as preparers orusers. Specifically, the averages are based on the
70% of respondents that provided theirorganization names and for which public
information was available.

502. Overview of Results
Overall, the Task Force was pleased with the number of responses it received to the survey,
especially the number of respondents that identified as preparers. The Task Force would like tohave received a larger number of respondents that identified as users and recognizes that further
outreach to users may be needed. Across respondent types, the Task Force received commentsthat helped clarify specific issues and enhance the Task Force’s analysis. The Task Force observed
positive aspects of the survey results as well as several continuing challenges associated with
implementing the TCFD recommendations and using climate-related financial disclosures.
Positive Aspects
The Task Force identified several areas where the vast majority of respondents provided apositive or favorable response, including the following:A
Introduction

BState of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

TCFD Implementation. Ninety-one percent (91%) of respondents that identified as preparers
have decided to “fully” or “partially” implement the TCFD recommendations, with 67% stating
their organizations plan to complete implementation within three years.
Use of Climate-Related Financial Disclosures. Seventy-six percent (76%) of respondents
that identified as users have incorporated climate-related financial disclosures in theirfinancial decision making processes.
Availability and Quality of Climate-Related Financial Disclosures. Eighty-five percent(85%) of respondents that identified as users or an organization that assists preparers withclimate-related financial disclosures saw an increase in the availability of climate-related
financial disclosures since the release of the TCFD recommendations in June 2017, with 75%
of such respondents citing improvements in the quality of disclosures.

The Task Force recognizes the survey results showed significantly higher rates of climate-related
financial disclosures in alignment with the TCFD recommendations than the findings of our wider
AI review of disclosures outlined in the previous section. This supports our view that progress—
while positive—is slower across a broader population. As such, the Task Force will continue tofocus on increasing the rate of awareness and implementation of the TCFD recommendations.
Continuing Challenges
Survey respondents also highlighted several challenges related to implementing the TCFD
recommendations and areas where climate-related financial disclosures need to be improved.
Appendices

Scenario Analysis. Almost half of the respondents that identified as preparers founddisclosing scenario analysis assumptions difficult due to their inclusion of confidential
business information. Section D. Disclosure of Strategy Resilience Using Scenario Analysis
provides more information on the survey results related to scenario analysis and disclosureof strategy resilience.
Standardization of Metrics. Respondents that identified as preparers stated that increased
standardization of metrics and targets would ease implementation challenges, while
respondents that identified as users noted increased standardization would improvecomparability across companies’ climate-related financial disclosures.
Financial Impact. The top area of disclosure identified by users as needing improvement
was for companies to provide more clarity on the financial impact of climate-related issues on
the companies.

In other areas, preparers’ views on implementation issues differed from users’ vision forimproving climate-related financial disclosures, as shown in Figure 52 (p. 52). Some of thesedifferences echo the feedback the Task Force received during its public consultation process in
2017, including preparers’ concerns with disclosing confidential information and difficulties in
identifying relevant metrics, especially ones that demonstrate financial impact. As discussed in its

The Task Force on Climate-related Financial Disclosures51

2017 report, in developing its recommendations and guidance, the Task Force recognized thetension between preparers and users and sought to balance the burden of disclosure on
preparers with the need for consistent and decision-useful information for users.
Figure 52

Differences in Perspectives between Preparers and Users

AIntroduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
AnalysisGovernance

Strategy

Risk Management

Metrics and Targets

Preparer View
Climate is embedded in
our processes so it ischallenging to discuss
separately in ourgovernance disclosures

Preparer View
Disclosing scenario
analysis assumptions isdifficult due to their
inclusion ofconfidential businessinformation

Preparer View
Climate is integrated
into our normal risk
management
processes andtherefore does not
require separate
disclosure

Preparer View
GHG emissions orcarbon footprint
metrics are notreflective of ourclimate-related risks oropportunities

User View
The most usefulelement of disclosures
on governance isinformation on how
companies integrate
climate-related risks
into the governanceframework and theassociated roles andresponsibilities

User View
Information on the
scenarios andassumptions used, as
well as financial impact
of climate-related
issues on theorganization would
improve the usefulnessof disclosures

User View
The most usefulelement of disclosureson risk management is
information on how
companies measureand manage climaterelated risks

User View
Information on GHG
emissions is a usefulelement of climaterelated financial
disclosures

3. Preparer Perspectives
The Task Force received 198 survey responses from individuals that identified themselves as
preparers, defined as someone who contributes to producing climate-related financial disclosuresfor his or her organization. The survey presented a series of questions to these respondents
designed to elicit information on their organizations’ efforts to implement the recommendations,
including levels of implementation and public disclosure, location of disclosures, factors andfunctions driving implementation, and implementation issues. The Task Force asked thesequestions of preparers to better understand where preparers are on the path to adoption andobstacles to the development of decision-useful climate-related financial disclosures.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

TCFD Implementation and Public Disclosure
The vast majority of preparers—91%—responded their organizations have decided to “fully” or“partially” implement the TCFD recommendations (Figure 53, p. 53). Of these respondents, 7%
said they have completed implementation of the TCFD recommendations, 9% said they expect tocomplete implementation within one year, 58% said in two to three years, and 21% said in morethan three years.27

The majority of respondents—67%—believe they will complete
implementation of the TCFD recommendations within three years.

27

The remaining 5% of respondents selected "other," with many noting they were unsure how long implementation would take.

The Task Force on Climate-related Financial Disclosures

52

The top two reasons respondents cited for their organizations deciding not to implement the
TCFD recommendations were that their organizations already disclose climate-related
information under other frameworks and investors have not requested this information.
Figure 53

Implementation of the TCFD Recommendations
Respondents Implementing the
TCFD Recommendations
46%, 91

Reasons for Not Implementing
the TCFD Recommendations

Climate-related information is alreadydisclosed under other frameworks

8

Investors have not requested this information

8

Do not consider climate change in strategy,
financial planning, or risk management

6

Peers are not disclosing climaterelated information5

Too much uncertainty around climaterelated issues

3

Climate is not material for my organization2

45%, 899%, 18A
Introduction

Fully

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Appendices

Not at all

Percent and Number of Responses

B
State of Climate-Related
Financial Disclosures

F
Initiatives Supporting
TCFD

Partially

Number of Responses(respondents could select multiple reasons)Base size (asked of all Preparers): 198

A key area of interest for the Task Force in conducting the survey was to better understand wherecompanies are with respect to implementing each of the TCFD recommendations—whether they
disclose information that “fully” or “partially” aligns with each recommendation or do not disclose
information for the recommendation. Figure 54 shows the levels of implementation for the
respondents that identified as preparers and indicated their organizations have decided to “fully”
or “partially” implement the TCFD recommendations. For each recommendation, a majority of
respondents said they disclose at least some climate-related information; however, only for theGovernance recommendation did a plurality of respondents indicate that the information
disclosed “fully” aligns with the recommendation (46% or 83 of 180). For the three otherrecommendations, the majority responded that the information they disclose “partially” aligns
with the recommendations. As organizations complete their implementation efforts, the Task
Force would expect the number that disclose “fully” to increase.
Figure 54

Disclosure by TCFD Recommendation
Disclosure by TCFD Recommendation
65%, 117

64%, 11559%, 107

46%, 83
42%, 76

12%, 21

Governance
Disclose Fully

12%, 21

Strategy
Disclose partially

31%, 56

27%, 48

24%, 448%, 15

Risk Management
Do not disclose

9%, 17

Metrics and Targets

Percent and Number of Responses

Base size (asked of a subset of Preparers): 180

The Task Force on Climate-related Financial Disclosures

53

Location of Disclosures
As described in its 2017 report, the Task Force recommended that preparers of climate-related
financial disclosures provide such disclosures in their annual financial filings. However, the Task
Force also recognized that reporting practices would evolve over time, with more climate-related
information moving into financial filings. To better understand whether more companies areincluding climate-related information in their financial filings, the Task Force asked survey
respondents that identified as preparers where they disclosed this information for fiscal years
2016, 2017, and 2018. Sustainability reports continue to be the dominant location of climaterelated financial disclosures; however, preparers increasingly include such information in theirfinancial filings, annual reports, and integrated reports, as shown in Figure 55.28
Figure 55

Location of Disclosures for Fiscal Years 2016, 2017, and 2018
112

126

132

130

140

139

A
Introduction

18

Financial Filings,
Annual Reports, orIntegrated Reports

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

FY 2016

Sustainability Reports

FY 201730

45

Climate-Specific
Reports

FY 2018

32

35

40
18

Other

7

1

None

Number of Responses (respondents could select multiple options)Base size (asked of a subset of Preparers): 185

Factors and Functions Driving Implementation
The Task Force asked respondents that identified as preparers why they were implementing the
TCFD recommendations, and the top two reasons cited were reputational benefits and investor
pressure, as shown in Figure 56.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Figure 56

Reasons for Implementing the Recommendations

F
Initiatives Supporting
TCFDGood corporate citizenship / Reputational benefits

74%

Investors are requesting this information

Appendices60%

Senior management made it a priority

51%

Our peers are implementing the recommendations

44%

We already report information aligned with the recommendations

42%

Other

15%

Percent of Responses
Base size (asked of a subset of Preparers): 180

28

Since respondents could select multiple
options, the sum is greater than 100%.

Please see the Glossary for definitions of financial filings, annual or integrated reports, and sustainability reports. Climate-specific reports referto reports that describe companies’ implementation of the TCFD recommendations or their use of climate-related scenario analysis; and “other”
refers to any other report or venue that a respondent identified as containing climate-related information, such as CDP reports and companies’
public websites.

The Task Force on Climate-related Financial Disclosures

54

Recognizing materiality could be a factor in organizations deciding to implement therecommendations, the Task Force also asked respondents about the timeframe in which theirorganizations considered climate-related risks to be material. Figure 57 shows that almost half ofthe respondents that identified as preparers said climate-related risks are material today, andalmost a quarter said climate-related risks will be material in the next 1-2 years or 3-5 years.

60% of respondents said their organizations consider climate-related
issues to be a material risk today or in the next 1-2 years.
Figure 57

Timeframe When Climate-Related Risks Will be Material
Now

49%

In the next 1-2 years

11%

In 3-5 years
A
Introduction

13%

In 6-10 years

6%

In 11-20 years

5%

In 20 or more years

B
State of Climate-Related
Financial Disclosures

Never

C
Adoption and Use of the
TCFD Recommendations

4%
1%

Not sure

12%

Base size (asked of Preparers): 198

Percent of Responses

In terms of functions driving implementation of the recommendations, 89% of respondents
identified their sustainability or corporate responsibility area as one of the functions driving
implementation, as shown in Figure 58. While the sustainability or corporate responsibility areas
may be a natural conduit for implementation efforts, particularly at larger, more complex
companies, the Task Force encourages increased involvement of executive management, risk
management, strategy, corporate reporting, and finance to provide companies with a more
holistic view and assessment of relevant climate-related risks and opportunities.29

DDisclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Figure 58

F
Initiatives Supporting
TCFDInternal Functions Involved in Implementation
Sustainability / Corporate Responsibility

Appendices

89%

Risk Management

41%

Executive Management37%

Corporate Reporting

28%

Finance
Other

Base size (asked of a subset of Preparers): 180

29

24%
8%

Percent of Responses

Since respondents could select multiple
options, the sum is greater than 100%.

This is consistent with the Task Force’s view that climate-related financial information should be included in annual financial filings andsubject to review by the chief financial officer and audit committee, as appropriate.

The Task Force on Climate-related Financial Disclosures

55

Figure 59 shows preparers’ responses on how the recommendations have affected theirorganizations, with the most common responses being the recommendations have encouraged
enhancement of climate-related practices and disclosures and increased internal and external
attention on climate-related issues.
Figure 59

Impact of the Recommendations
Encouraged my organization to enhance disclosures

81%

Encouraged my organization to begin or continue using
scenario analysis

71%

Increased board / senior management attention on
climate-related issues

68%

Increased investor attention on our climate-related issues

58%

Driven improved risk management of climate-related issues

57%

6%

No impact
A
IntroductionC
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Since respondents could select multiple
options, the sum is greater than 100%.

Base size (asked of a subset of Preparers): 180

B
State of Climate-Related
Financial Disclosures

Percent of Responses

Implementation Issues
The Task Force asked respondents that identified as preparers to rate the ease or difficulty of
implementing each TCFD recommendation and to identify specific implementation issues. In
response, preparers reported significant implementation issues across the recommendations,with the majority of respondents rating each recommendation other than Governance as“somewhat difficult” or “very difficult” to implement (see Figure 60). Respondents that identified as
preparers appear to be having the most difficulty implementing the recommendation on Strategy,
with 26% describing it as “very difficult.” In particular, respondents highlighted issues related toscenario analysis and assessing the resilience of their strategies, which are discussed further in
Section D. Disclosure of Strategy Resilience Using Scenario Analysis. To a lesser extent,
respondents also identified the recommendations for Risk Management and Metrics and Targets
as “very difficult” to implement—16% and 19%, respectively.
Figure 60

Implementation Rating by Recommendation

Appendices

Very
DifficultSomewhat
Difficult

Relatively
Easy

Very
Easy

Governance

4%

37%

49%

10%

Strategy

26%

53%

18%

3%

Risk Management

16%

59%

24%

1%

Metrics and Targets

19%

54%

25%

2%

Base size (asked of a subset of Preparers): 180

LegendLow to high percentage of responses

Figure 61 (p. 57) describes the reported implementation issues0%
by##recommendation.
## ## ## ## ## ##Of##note,## ##thetop cited issue for both the Governance and Risk Management recommendations was that for
preparers with climate-related issues integrated into existing governance and risk management
frameworks, making a separate or explicit climate-related financial disclosure is challenging. The

The Task Force on Climate-related Financial Disclosures

56

Task Force did not intend for companies with comprehensive governance and risk management
processes that address climate-related issues to duplicate existing disclosures. If a company's
disclosures clearly describe its governance and risk management processes and it is clear those
processes cover climate-related issues, then no further disclosure may be needed. The top cited
issue on the Strategy recommendation was concerns about disclosing confidential businessinformation; and the Task Force wishes to highlight that it did not intend for preparers to disclose
confidential business information.

Figure 61

Key Implementation Issues Identified

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Appendices

Strategy

Risk Management

Metrics and Targets‒ Climate is‒ Disclosing assump-‒ Climate is integrated‒ There is a lack oftions is difficult
because they
include confidential
business information (46%, 83)

into our risk
management
processes and,
therefore, does not
require separate
disclosure(36%, 65)

embedded in our
processes so it ischallenging todiscuss separately in
our governancedisclosures(49%, 89)

A
Introduction

F
Initiatives Supporting
TCFD

Governance‒ None (35%, 63)‒ Our board and/or
management does
not consider
climate-related
issues (11%, 19)‒ Unsure how toassess resilience(23%, 42)

‒ None (22%, 40)‒ None (16%, 29)‒ We do not have

‒ Climate-related risks
are not material so it
is challenging toinclude them infinancial filings(11%, 19)

Base size (asked of a subset of Preparers): 180processes for
identifying, assessing, or managing
climate-related risks(17%, 31)

standardized metrics
for our industry(42%, 75)

‒ We are just beginning to use climaterelated metrics andtargets and are notready to disclose
them (27%, 48)‒ None (23%, 41)‒ Emissions-related

metrics are notreflective of ourclimate-related risks(13%, 24)

Percent and Number of Responses

Since respondents could select multiple options, the sum may be greater than 100%.

4. User Perspectives
The Task Force received 46 survey responses from individuals that identified themselves as users,
defined as someone responsible for making financial decisions, such as investing, lending, or
insurance underwriting decisions, based on companies’ disclosures. The survey presented aseries of questions to these respondents related to their organizations’ use of climate-related
financial disclosures in financial decision making, including levels of use, decision-useful elementsof disclosures, and desired improvements to disclosures. Given the relatively small sample size of
respondents that identified as users, the Task Force cautions that the results may not be
representative of the broader population of users of climate-related financial disclosures.
Use of Disclosures
The Task Force asked survey respondents that identified as users about their use of climaterelated financial disclosures in financial decision making. Seventy-six percent (76% or 35 of 46)
stated their organizations use climate-related financial disclosures for such decision making, withinvesting and lending decisions being the primary uses, as shown in the charts at the top of Figure
62 (p. 58). The chart at the bottom of Figure 62 (p. 58) shows the types of financial decisions forwhich respondents from different industries use climate-related financial disclosures. For
example, respondents from the asset management industry primarily use climate-related
financial disclosures for investment decisions whereas respondents from the banking and

The Task Force on Climate-related Financial Disclosures57

insurance industries appear to use such information for a broader range of financial decisions—investing, lending, insurance underwriting, credit rating, and other financial decisions.
Figure 62

Use of Climate-Related Disclosures in Financial Decision Making
Percent of Respondents that
Use Climate-Related Disclosures

Uses by Industry*

21

Asset Management10

Pension24%

Yes

Banking

No

Insurance

76%

Renewable Energy

2Technology

2

Export Credit

2DDisclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesLending

Insurance Underwriting
Credit Rating
Other

17%

Credit Rating

C
Adoption and Use of the
TCFD Recommendations

InvestingNumber of Responses

22%

Lending1

Healthcare

74%

Investing

B
State of Climate-Related
Financial Disclosures

4

Other - Financial

Types of Decisions in which ClimateRelated Disclosures are Used**A
Introduction

8
6

Other

7%

Insurance Underwriting

2%* Respondents could select multiple types of uses (investing, lending, etc.).
** Since respondents could select multiple options, the sum is greater than 100%.

Base size (asked of all Users): 46

For the 24% of users (11 of 46) who said their organizations do not use climate-related financial
disclosures in financial decision making, the most commonly cited reasons for not using suchinformation were (1) difficulty quantifying climate-related risks based on current disclosures and(2) difficulty locating climate-related information.
Usefulness of Disclosures
The Task Force asked respondents that identified as users to rate the usefulness of information
disclosed in alignment with each TCFD recommendation for financial decision-making as “notuseful,” “somewhat useful,” or “very useful.” In response, the majority of users rated theinformation aligned with the recommendations as “very useful” with the exception of theGovernance recommendation, where respondents were split between “somewhat useful” and“very useful,” as shown in Figure 63.
Figure 63

Disclosure Usefulness Rating by Recommendation
Not UsefulSomewhat Useful

Very Useful

Governance

0%

52%

48%

Strategy

0%

35%

65%

Risk Management

4%

28%

67%

Metrics and Targets

2%

35%

63%

Base size (asked of all Users): 46

LegendLow to high percentage of responses
0% ## ## ## ## ## ## ## ## ## ##The Task Force on Climate-related Financial Disclosures58

To better understand the specific types of information that are useful for financial decisionmaking, the Task Force asked respondents that rated the disclosures as “somewhat useful” or“very useful” to describe the information, for each recommendation, they have found most useful.
As shown in Figure 64, respondents identified information on how companies (1) incorporate
climate into their governance framework; (2) measure and manage climate-related risks; and (3)address such risks in their strategies as particularly useful elements of disclosure.
Figure 64

Key Themes of Useful Elements of Climate-related Disclosures
Governance

Strategy

Risk Management

Metrics and Targets‒ Information on the‒ How the company’s‒ How the company‒ Identification of

governanceframework,
including roles andresponsibilities(65%, 15)

strategy addresses
its material risks(26%, 6)

measures andmanages climaterelated risks(45%, 9)relevant goals
and targets(57%, 12)

‒ Board oversight(30%, 7)A
Introduction‒ Group or

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendicesdepartment
accountable forclimate-related
issues (13%, 3)‒ The resiliency of thecompany’s strategy(22%, 5)

‒ Detailed plans on
how the company isadjusting its business in response to
climate changes(22%, 5)‒ Long-term plans
and goals (13%, 3)Base size: 23

Base size: 23

Base size varies by recommendation.

‒ Information on thecompany’s exposure to physical andtransition risks(40%, 8)‒ Information onemissions (38%, 8)‒ Discussion ofprogress against
goals and targets(33%, 7)

‒ Whether climaterelated risks areintegrated into
overall risk
management(20%, 4)
Base size: 20

Base size: 21
Percent and Number of Responses

Since respondents could select multiple options, the sum may be greater than 100%.

Desired Improvements to Disclosures
The Task Force asked respondents that identified as users how the usefulness of climate-related
financial disclosures could be improved. Users responded by suggesting a broad range ofenhancements to climate-related financial disclosures, with more clarity on the financial impact ofclimate-related issues being the most common request (76% of users), as shown in Figure 65 (p.
60). Seventy-two percent (72%) of users asked for a general increase in the availability of
disclosure, as well as disclosure of standard industry-specific climate-related metrics. Fifty-sevenpercent (57%) of users requested disclosure of scenarios and assumptions used.

The Task Force on Climate-related Financial Disclosures59

Figure 65

Desired Improvements to Disclosures
Provide more clarity on the financial impact of climaterelated issues on the organization

76%

Increase the availability of disclosures

72%

Disclose standard industry-specificclimate-related metrics

72%

Disclose scenarios and assumptions used

57%

Centralize the location of disclosure to include all relevant
information in a single report

52%

Use a standard scenario for assessing strategic
resilience to climate change

Other

48%
17%
Percent of Responses

Base size (asked of all Users): 46

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Since respondents could select multiple
options, the sum is greater than 100%.

5. Conclusion
The survey results suggest that organizations are making progress in implementing the TCFD
recommendations and using climate-related information for decision-making, but that much work
remains. From the perspective of the 198 respondents that identified as preparers of climaterelated financial disclosures, the majority represented that they:







Are in the process of implementing the TCFD recommendations, with reputational benefits
and investor pressure being the top two factors driving implementation;
Report on climate-related information in both their annual reports and sustainability
reports—with a small percentage reporting only in sustainability reports;
Recognize climate-related risks are or soon will be material to their organization; andPlan to complete implementation of the TCFD recommendations in the next two to three
years.

Nonetheless, these preparers—55% of whom are from non-financial companies—highlighted key
challenges in implementing the recommendations, including lack of standardized industry metrics
and concerns about revealing confidential business information.
From the perspective of the respondents that identified as users of climate-related financial
disclosures, over three-quarters indicated that they include such information in their financial
decision-making processes. However, these respondents also requested improvements toclimate-related financial disclosures—notably, asking for more clarity on the financial impact ofclimate-related issues.
Across the respondent population, including preparers, users, and other parties interested inclimate-related financial disclosures (e.g., NGOs, consultants, public sector, academia),
respondents cited improvements to the availability and quality of climate-related financial
disclosures and voiced their support for the Task Force.

The Task Force on Climate-related Financial Disclosures60

ductionof Climate-Related
cial Disclosurestion and Use of the
Recommendations

osure of Strategy
ence Using Scenario
sisPerspectives on
ion-Useful Climateed Financial
osuresD Disclosure ofStrategy Resilience
Using Scenario
Analysis

tives Supporting

ndicesThe Task Force on Climate-related Financial Disclosures61

D. Disclosure of Strategy Resilience Using Scenario Analysis
1. Background
One of the Task Force’s key recommended disclosures—referred to as Strategy c)—focuses on theresilience of a company’s strategy, taking into consideration different climate-related scenarios,
including a 2°C or lower scenario (see Figure 66). The Task Force believes a company’s disclosureof how its strategy addresses potential
climate-related risks and opportunities is a
Figure 66
key step to better understanding the potential
Strategy Recommendation
implications of climate change on thecompany. In its 2017 report, the Task Force
Strategy
recognized the use of scenarios in assessing
climate-related issues and their potential
Disclose the actual and potential impacts offinancial implications is relatively recent andclimate-related risks and opportunities on thepractices will evolve over time. In its 2018
organization’s businesses, strategy, and financial
planning where such information is material.
status report, the Task Force highlighted thatvery few companies disclosed information on
Recommended Disclosures
the resilience of their strategies (or strategy

A
Introduction

resilience) under different climate-related
scenarios. Given the importance of disclosing
strategy resilience, the Task Force has taken acloser look at challenges identified by
preparers and examples of current reportingthat relate to Strategy c).

BState of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendationsa) Describe the climate-related risks andopportunities the organization has identified
over the short, medium, and long term.
b) Describe the impact of climate-related risks
and opportunities on the organization’s
businesses, strategy, and financial planning.

The central tenet of Strategy c) is that climaterelated risks, like other risks, can havec) Describe the resilience of the organization’s
potential strategic implications for a company.
strategy, taking into consideration different
Given the uncertainties of climate change, theclimate-related scenarios, including a 2°C or
Task Force believes companies should
lower scenario.
describe to stakeholders how well theirstrategies, including financial and operatingplans, might perform over a range of plausible future climate states.30 Companies’ assessments of
their strategies should take account of a range of different plausible future climate states,
including a transition to a lower-carbon economy consistent with a 2°C or lower scenario and,
where relevant to the company, scenarios consistent with increased physical climate-related risks.

D
Disclosure of Strategy
Resilience Using
Scenario Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

To help companies implement Strategy c), the TCFD provided guidance in its 2017 report andtechnical supplement on the use of scenarios.31 To emphasize the importance of thisrecommended disclosure and provide additional insight on the use of scenario analysis, thissection of the report highlights progress in the use of scenario analysis by companies forassessing the resilience of their strategies as well as trends and potential challenges facing
companies in disclosing information about their strategy resilience under a range of climaterelated scenarios.

In its 2017 report, the Task Force noted that for the Strategy and Metrics and Targets recommendations “organizations should provide suchinformation in annual financial filings when the information is deemed material.”
31
The Task Force’s technical supplement, The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities, provides more
information on scenario inputs, analytical assumptions and choices, and assessment and presentation of potential impacts.
30

The Task Force on Climate-related Financial Disclosures622. Results from the TCFD Survey
A key takeaway from the 2018 status report was that information related to Strategy c) had thelowest levels of disclosure across the 11 recommended disclosures. As a result, in developing the2018 TCFD survey, the Task Force included specific questions about a company’s use of scenarios
in assessing the resilience of its strategy to climate-related issues and its disclosure of informationon the resilience of its strategy under different climate-related scenarios.
As noted in Section C. Adoption and Use of the TCFD Recommendations, 198 survey respondents
identified themselves as preparers of disclosures, with 45% from the financial sector and 55%
from non-financial industries. These respondents were asked to rate the level of effort, from very
easy to very difficult, needed to implement each of the TCFD recommendations. The majority of
those respondents found the Strategy recommendation somewhat difficult or very difficult toimplement, and the most often cited reason was concern around disclosing confidential businessinformation as part of scenario assumptions.
The TCFD survey also asked respondents that identified as preparers about their companies’ useof scenarios to assess the resilience of their strategies. Of the 198 preparer respondents, 110(56%) said their companies use scenarios for that purpose, 37 (19%) said scenario analysis is indevelopment or early stages of implementation, and 43 (22%) said their companies were notusing scenarios at this time (Figure 67, chart on left).32 The list on the right in Figure 67 shows thereasons given for not using scenarios and the number of respondents that cited that reason.

A
Introduction
B
State of Climate-Related
Financial Disclosures

Figure 67

Use of Climate-Related Scenarios and Reasons for Not Using Scenarios

C
Adoption and Use of the
TCFD Recommendations

Use of Scenarios
Use ofofScenarios
Percent and Number
Respondents*

Reasons for Not Using
Scenario Analysis

43%, 85

DDisclosure of Strategy
Resilience Using
Scenario Analysis

33%, 65

No standard scenarios or assumptions 11

15%, 30

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

22%, 43

19%, 374%, 8Transition
Risk

F
Initiatives Supporting
TCFD

Physical Risk Other Risks

Base size (asked of all Preparers): 198

In
Development

Other

Do Not Use

Percent and Number of Responses

Too complex or costly 10
Under consideration

9

Climate does not present amaterial risk

5

Other priorities

5

We use other methods to assessclimate-related risk

3

Number of Responses(respondents could select multiple reasons)

To understand further how companies use climate-related scenarios, the Task Force asked survey
respondents about the types of risks—transition, physical, or other risks—they use climaterelated scenarios to assess. As shown in the chart on the left in Figure 67, most of the
respondents using scenario analysis said they use it for transition or physical risk, while 15% of
respondents said they use scenario analysis to assess other risks.

Appendices

Of the respondents indicating they use scenario analysis (110 of 198), 43% were from the financial
sector and 57% were from non-financial industries. About half of the financial sector respondents
were banks; and two-thirds of the non-financial respondents were in the oil and gas, materials,
industrials, or utilities industries.
Importantly, only 46 out of 110 preparers using scenario analysis (43%) said they publicly disclose
information on the resilience of their strategies under different climate-related scenarios. This32

The 110 preparers (56%) that use scenarios could select multiple types of risk (transition, physical, other) for which they use climate-related
scenarios, resulting in the sum of the number and percent for the left three bars in Figure 67 exceeding 110 and 56%, respectively.

The Task Force on Climate-related Financial Disclosures63may be an important gap in disclosure for companies with material climate-related risks, but it isconsistent with the Task Force’s understanding from discussions with various companies, industry
associations, and other groups that companies are still early in the process of using climaterelated scenarios internally, evolving their approaches, and learning how to integrate scenarios
into corporate strategy formulation processes.33
To better understand the use of scenario analysis and disclosure of strategy resilience, the Task
Force reviewed the survey responses from preparers in the context of when they thought climaterelated risks would be material to their companies. As shown in Figure 68 (chart on the left), 31%
of preparer respondents are using scenarios for assessing strategy resilience and believe climaterelated risks are material for them today. Of the respondents using scenario analysis that believe
climate-related risks are material now, more of them are not disclosing strategy resilience thanare disclosing (Figure 68, chart on the right).

Figure 68

Use of Climate-Related Scenarios and View of Materiality
Use Scenarios for Assessing Resilience

Use of Scenarios and View of Materiality
Legend: When climate-related risk will be materialA
Introduction

Now

31%

In the next 1-2 years
5% 4% 1% 5%

In 3-5 years

B
State of Climate-Related
Financial Disclosures

Do notdiscloseresilience

In 6-10 years
In 11-20 years
In 20 or more years

Discloseresilience

Not sureC
Adoption and Use of the
TCFD Recommendations

Never

33%

23%
3%

11%

7%

5%

4%

0%

0%

3% 3% 4% 3%

8%DDisclosure of Strategy
Resilience Using
Scenario Analysis

3%

5%

4%

4%
1% 1%

0%

Do not use scenarios

1%

3%

1%

4%

4%
1%
0%

4% 4% 3%

Base size (asked of all Preparers using scenarios): 110
Percent of Responses

5%0%

Scenarios are in development
or used for other purposes0%
Use scenarios forassessing resilience

Base size (asked of all Preparers): 198

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

6%

Percent of Responses

The Task Force recognizes that companies’ use of scenarios in assessing climate-related issues
and their potential financial implications will take time to implement and will evolve, but believes
scenario analysis is critical for improving the disclosure of decision-useful, climate-related
information on a company’s strategy. Investors and other stakeholders continue to emphasize theimportance of information on how a company’s strategy might fare under different climaterelated scenarios. Based on the survey results, 95% of the 46 respondents that identified as usersof climate-related financial disclosures found information about a company’s strategy useful for
their financial decision-making; and 61% said climate-related financial disclosures have affected afinancial decision.

F
Initiatives Supporting
TCFD
Appendices3. Challenges Related to the Use of Climate-Related Scenario Analysis
Through its ongoing discussions with companies and other organizations and analysis of
responses to the TCFD survey, the Task Force recognizes companies continue to find certain

33

For another perspective on companies’ use of scenario analysis, see Institute for Climate Economics, Climate Brief No61: Very few companies
make good use of scenarios to anticipate their climate-constrained future, February 2019.

The Task Force on Climate-related Financial Disclosures64aspects of scenario analysis challenging. In particular, the Task Force has identified the following
as key challenges in implementing the Strategy recommendation:







Lack of appropriately granular, business-relevant data and tools supporting scenario analysis;
Difficulty determining scenarios, particularly business-oriented scenarios, and connecting
climate-related scenarios to business requirements;
Difficulties quantifying climate-related risks and opportunities on business operations andfinances; andChallenges around how to characterize resiliency.

Industry associations and others working on climate-related scenario analysis have echoed manyof these challenges. Addressing these challenges will require further work by the Task Force,companies, industry associations, and others, in the four key areas described below.
Data, Tools, and Resources
While preparers continue to raise the need for business-relevant data and support tools,
significant progress has been, and continues to be, made in this area. Many tools, data, models,and guidance exist to assist companies in applying scenarios and similar approaches to theassessment of their climate-related risks and opportunities.

A
Introduction

The Climate Disclosure Standards Board (CDSB), with input from the TCFD Secretariat, created a
TCFD Knowledge Hub to house a variety of resources—such as guidance, research, tools,
standards, frameworks, and webinars—that facilitate implementation of the TCFD
recommendations. The TCFD Knowledge Hub’s Scenario Analysis summary page provides extracts
and highlights from the TCFD’s technical supplement that may be a helpful starting point forunderstanding scenario analysis and its usefulness, as well as other resources and tools intended
to help companies broaden and deepen their understanding and practical application of
scenarios. These resources range from academic papers about specific sectors to introductory
briefings and practical guidance.

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using
Scenario Analysis

In addition to these resources, other parties, such as industry associations, NGOs, and consulting
firms, are developing guidance and tools for assisting companies in using climate-related
scenarios, assessing climate-related risks, and developing climate-resilient strategies. This
includes several industry associations and non-governmental organizations that have brought
companies together to work through sector-specific approaches to climate change issues. For
example, the World Business Council for Sustainable Development (WBCSD) has convened or
announced “preparer forums” for various sectors and industries: oil and gas; electric utilities;
chemicals; construction; automobiles; and food, agriculture, and forest products.34 The United
Nations Environment Programme Finance Initiative (UNEP FI) worked with sixteen large global
banks to pilot the TCFD recommendations and develop a scenario-based approach for assessing
the potential impact of climate change on the banks’ lending portfolios. 35 See Section F.4.
Initiatives Related to Scenario Analysis for more information on industry and other initiatives
aimed at supporting implementation of the TCFD recommendations.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesBusiness-Relevant Scenarios
Many existing climate-related scenarios currently in the public domain, including those developedby the International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC)
are intended primarily for research and policy purposes on a global scale. As such, somecompanies using these scenarios to assess potential financial impacts on their businesses may
find it challenging to incorporate the global-scale output of these models into their scenario
34
35

See WBCSD’s Task Force on Climate-related Financial Disclosure (TCFD) Preparer Forums for more information.
See UNEP FI, Extending Our Horizons: Assessing credit risk and opportunity in a changing climate (Part 1: Transition-related risks & opportunities), April
2018, and UNEP FI, Navigating a New Climate: Assessing credit risk and opportunity in a changing climate (Part 2: Physical risks & opportunities), July
2018.

The Task Force on Climate-related Financial Disclosures65

analysis. This makes it difficult for companies to leverage such scenarios in their own assessmentsof strategy resilience.
Further work is required on the development of business-oriented scenarios. This will likely
require a better understanding of climate impacts at scales below the global level, identification of
the key climate-related drivers affecting business performance, and the key climate-related
uncertainties faced by an industry. Furthermore, several survey respondents (both preparers andusers) indicated that the use of “standard” scenarios would be beneficial. Such an approach may
reduce concerns about releasing confidential business information, reduce scenario analysis
costs, and improve transparency and comparability of disclosures. However, the use of standard
scenarios may introduce other challenges and mean less flexibility for companies in tailoring
assumptions and key drivers to their specific businesses.
Business and Financial Impacts of Climate-Related Risks and Opportunities
Another key challenge for companies relates to determining the financial implications of different
climate-related scenarios. In addition, the most often cited improvement by users that responded
to the TCFD survey was the need for more clarity on the financial impact of climate-related issues
on companies. A recent report, based on CDP data from over 1,600 companies, highlighted “that alarge number of companies do not report financial impacts and that many that do are probably
underestimating them.”36 Furthermore, the report noted that “companies clearly need further
guidance on estimating the costs of physical climate change impacts, particularly in using scenario
analysis to derive cost ranges for risks […].”37

A
Introduction
B
State of Climate-Related
Financial Disclosures

The Task Force recognizes the financial impacts of climate-related issues on companies are notalways clear or direct and, for many companies, identifying the issues and assessing potential
impacts may be challenging. In the annex to its 2017 report, the Task Force described someconsiderations for assessing the financial impacts of climate-related risks and opportunities.38
Specifically, the Task Force highlighted four major categories of financial impact that companies
should consider—revenues, expenditures, assets and liabilities, and capital and financing—andprovided examples of specific elements under each category. Some of the elements forconsideration include potential business interruptions, supply chain disruptions, and distribution
channel disruptions due to physical impacts of climate change and changes in asset values
resulting from transition risk. The Task Force recognizes the specific elements may vary fromindustry to industry. For example, the WBCSD’s work with the oil and gas industry on
implementing the TCFD recommendations highlighted changes in portfolio mix, investment in
new technologies, capital and cost base flexibility, reserve life, capital allocations plans, andresearch and development spending as relevant elements for consideration.39

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using
Scenario Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Strategy Resilience
Finally, the Task Force understands—from the TCFD survey results and discussions withcompanies—that some preparers are unsure of the types of information to disclose todemonstrate the resilience of their strategies. While there is no single definition of strategy
resilience, the Task Force encourages companies to describe the characteristics of their strategies
that allow them to adapt to climate-related changes materially affecting their business while
maintaining operations and profitability and safeguarding people, assets, and overall reputation.
Information disclosed about the climate resiliency of a strategy should allow investors tounderstand how the company is positioning itself given identified, material climate-related risks
and opportunities. In this context, investors are likely to need information on the range ofAppendices

CDP is a not-for-profit organization that administers a global disclosure system for reporting by companies, cities, states, and regions on
their environmental impacts. See Goldstein, A., Turner, W., Gladstone, J., Hole, D. (2018), The private sector’s climate change risk and adaptation
blind spots. Nature Climate Change, published online December 10, 2018.
37
Ibid.
38
Task Force on Climate-Related Financial Disclosures, Implementing the Recommendations of the Task Force on Climate-related Financial
Disclosures, June 29, 2017.
39
WBCSD, Climate-related Financial Disclosure by Oil and Gas Companies: Implementing the TCFD Recommendations, July 19, 2018.
36

The Task Force on Climate-related Financial Disclosures66

scenarios considered by a company; implications of each scenario for the business; strategic
options considered; and the reasoning around the strategy adopted. Another factor that may
warrant disclosure is the company’s ability—and flexibility—to adjust its strategy in response to
emerging climate conditions, including alternative ways to use resources and the robustness andredundancy of business processes.
The Task Force recognizes that some preparers, including nearly half of those that responded to
the TCFD survey, remain concerned about the disclosure of confidential business information
when discussing strategy and strategy resilience. Further work by industry groups, in conjunction
with users, to better articulate information needs and define reasonable disclosure content isneeded.

4. Selected Companies’ Use of Scenario Analysis
Despite these challenges, companies in different sectors are using climate-related scenarios toassess strategy resilience and disclose information on the resiliency of their strategies. To
illustrate the use of scenarios, the practices of several selected companies (Figure 69) aredescribed below.40 While these companies
take different approaches to assessing
Figure 69
their strategy resilience, they all use
Selected Companies
scenario analysis and provide disclosureswith characteristics broadly aligned with
BHP is an Australia-based, multinational mining,
metals, and petroleum company
the TCFD recommendations or related
guidance. We highlight four such
BlueScope Steel Limited is an Australia-based
steel manufacturer
characteristics:

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

D
Disclosure of Strategy
Resilience Using
Scenario Analysis

E
User Perspectives on
Decision-Useful ClimateRelated Financial
DisclosuresF
Initiatives Supporting
TCFD

Uses multiple climate-related
scenarios to assess resilience ofstrategy
Describes assumptions andparameters specific to the company
Identifies potential impacts of climaterelated risks or opportunities
Discloses potential strategy resilience
under different climate-related
scenarios

Citi is a U.S.-based multinational investmentbank and financial services company
Oil Search is a Papua New Guinea-based oil andgas exploration and development company
OPTrust is a Canadian legal trust that manages
one of Canada’s largest pension funds
Rio Tinto is a British-Australian metals andmining company
Unilever is a British-Dutch global consumer
goods company

In this section, the Task Force distills information from the selected companies’ publicly available
disclosures into tables to allow comparison of specific characteristics across certain companies.

Appendices

The information included does not necessarily depict “best practices”
nor represent disclosure that fully meets each of these characteristics.
In addition, to maintain readability of the tables, each table includes information from four of theseven companies rather than all seven. The information provided below illustrates aspects of how
companies—across different industries and exposed to different types of climate-related risks(transition and physical)—are using climate-related scenarios to evaluate the resilience of theirstrategies.

40

Selected companies were identified based on responses to the TCFD survey as well as through interviews with NGOs, academics, andconsulting firms. The mention of specific companies does not imply they are endorsed by the TCFD or its members in preference to others ofa similar nature that are not mentioned.

The Task Force on Climate-related Financial Disclosures67

Importantly, while the selected companies are using more advanced approaches of scenario
analysis (i.e., using complex models and sophisticated analytical techniques), the Task Forceemphasizes that scenario analysis can take different forms along a “qualitative-quantitative”
spectrum. At one end, scenario analysis can be solely qualitative, relying on descriptive, written
narratives to challenge strategic thinking and explore relationships and trends. At the other end,
scenario analysis might rely on numerical data, models, or sophisticated analytical techniques. In
between are varying degrees of a qualitative narrative supplemented with numerical content.
As noted in the Task Force’s technical supplement, companies just beginning to use scenario
analysis may choose to start with qualitative scenario narratives or storylines to help
management explore the potential range of climate change implications for the company. As acompany gains experience with qualitative scenario analysis, the scenarios and associatedanalysis of development paths can use quantitative information to illustrate potential pathways
and outcomes. For companies with significant experience conducting scenario analysis, greater
rigor and sophistication in the use of data sets and quantitative models and analysis may be
warranted. Quantitative approaches may be achieved by using existing external scenarios andmodels (e.g., those provided by third-party providers) or by companies developing their own, inhouse modeling capabilities. The choice of approach will depend on a company’s needs,
resources, and capabilities. Companies that are likely to be significantly impacted by climaterelated transition or physical risks should consider some level of quantitative scenario analysis.

A
Introduction

Uses Multiple Climate-Related Scenarios to Assess Resilience of Strategy
Throughout its 2017 report, the Task Force emphasized the importance of (1) using a set of
scenarios that covers a reasonable variety of plausible future climate states and (2) including inthe scenario set a 2°C or lower scenario. The selected companies employ a range of climaterelated scenarios from a variety of sources, including scenarios that are publicly available (e.g.,
from IEA), internally produced, and vendor-developed.41 Each company uses a 2C or lower
scenario as one of several climate-related scenarios to evaluate the potential implications ofclimate-related risk and specifies the time horizon of the climate-related scenarios (e.g., 2030,
2050, etc.) as summarized in Table 1 (p. 69).42,43,44

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using
Scenario Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Oil Search, Climate Change Resilience Report 2017, March 22, 2018, p. 20. OPTrust, Portfolio Climate Risk Assessment, January 24, 2017, p. 5.
BlueScope, 2017-2018 Sustainability Report, October 29, 2018, p. 53. Citi, Finance for a Climate-Resilient Future: Citi’s TCFD Report, November 13,
2018, pp. 7 and 21. Oil Search, Climate Change Resilience Report 2017, March 22, 2018, pp. 20 and 24-25. Rio Tinto, Our Approach to Climate
Change, February 27, 2019, p. 19.
43
See the Task Force’s technical supplement (pp. 3-4) for a discussion of scenario characteristics.
44
The time horizon specified for a scenario is not necessarily equivalent to a company’s planning timeframe. Scenarios describe a plausible
climate pathway from the present to the stated time horizon (e.g. 2030, 2050, etc.), based on the scenario’s assumptions. Given this pathway,
a company must assess the implications of the scenario pathway for the company within a stated planning timeframe (e.g., 5-10 years). The
TCFD’s 2017 report suggests that companies define planning timeframes for climate-related risks and opportunities taking into consideration
the life of their assets, their climate-related risk profile, and the geographies in which they operate.
41
42

The Task Force on Climate-related Financial Disclosures

68

Table 1

Description of Climate-Related Scenarios Used
Time
Horizon

Temp.
OutcomeDescription of Scenarios

BlueScope
2050

2°C or less

Global Cooperation: Describes a scenario with carbon pricing. Advances in green
technology and growth in urbanization lead to drop in steel intensity, but overall
demand increases.

3°C

Patchy Progress: Regional adoption of climate-related policies leads to 3°C increase.
Rapid urbanization drives demand for steel as does increased demand for weatherresilient products.

4°C

Runaway Climate Change: Little or no action to tackle climate change. Heavy
climate impact (including 0.5-meter sea rise, large-scale displacement) occurs. Supply
chains and operations are impacted, and demand increases for durable and weatherresilient products.

1.5°C, 2°C,
and 4°C

Transition Risk Scenarios: Consider 1.5°C and 2°C scenarios relative to a businessas-usual 4°C scenario for U.S. utilities portfolio and North American exploration andproduction portfolio.

2°C and
4°C

2°C Physical Risk Scenario: Corresponds to IPCC RCP 2.6 for U.S. utilities portfolio.
4°C Physical Risk Scenario: Corresponded to IPCC RCP 8.5 using data from scientificstudies of climate and potential climate impacts (e.g., availability of water on power
production in the future) for U.S. utilities portfolio.

~1.5°C

Greenpeace Advance Energy [R]evolution Scenario: Sets a target for complete
decarbonization by 2050. The scenario assumes a near-zero emissions world in 2050,
based on 100% renewable energy supply.

2°C

IEA 450 Scenario: Depicts a 50% chance of limiting warming to 2°C by 2100 throughtechnology (e.g., renewables and carbon capture and storage or CCS), policy
initiatives, and the phasing out of fuel subsidies.

~2.7°C45IEA New Policies Scenario: Depicts strong gas demand growth with peak oil and gas
not occurring until 2040, with gas as a higher percent of fuel mix.

1.7-1.8 °C

IEA Sustainable Development Scenario: Assumes relatively high carbon prices (upto US$140/tCO2e by 2040 in developed countries) as well as wide-spread deploymentof low-carbon technologies such as CCS.

2.5-3.5°C

Coordinated Action: Describes a central case view of policy pathways to 2050, taking
account of climate change objectives and the feasibility of policies being adopted.

Citi
2030 and
2040
A
Introduction
B
State of Climate-Related
Financial Disclosures

Oil SearchC
Adoption and Use of the
TCFD Recommendations

2040

D
Disclosure of Strategy
Resilience Using
Scenario Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Rio Tinto
0-20 years
and 20-50
years
horizons

F
Initiatives Supporting
TCFD

Describes Assumptions and Parameters Specific to the Company
In the annex to its 2017 report, the Task Force recommended that non-financial companies withmore than one billion U.S. dollar equivalent in annual revenue should consider conducting morerobust scenario analysis and disclosing the critical assumptions and input parameters for the
scenarios they use. As shown in Table 2 (p. 70), each of the selected companies disclosed theircompany-specific assumptions (economic growth, governmental policy, energy mix, etc.)—a
critical element of making scenarios useful for strategic planning.46

Appendices45
46

See IEA “Energy and climate change” for more information on IEA’s climate scenarios’ temperature target and carbon pathway assumptions.
BHP, Climate Change: Portfolio Analysis, September 29, 2015, p. 9. BlueScope, 2017-2018 Sustainability Report, October 29, 2018, p. 53. Citi,
Finance for a Climate-Resilient Future: Citi’s TCFD Report, November 13, 2018, pp. 7 and 12. OPTrust, Portfolio Climate Risk Assessment, January
24, 2017, p. 12.

The Task Force on Climate-related Financial Disclosures69

Table 2

Company-Specific Assumptions
Topic

Brief Description of Assumption

BHP47
Economic growth“Robust global economic growth sustains strong impetus to develop and implement
cleaner, more energy efficient solutions that support growth.”

Technology“Technology plays a pivotal role with breakthroughs in new, next generation clean energy
technologies. Higher-cost options are often deployed to meet lower emissions targets.”

Policy/regulatory“Unified societal action to address climate change leads to high cooperation andcommitment to limit emissions.”

BlueScopeA
Introduction

Carbon pricing

Outcomes associated with “uniform carbon pricing [i]n most OECD countries,” “little orno global action to tackle climate change” where “no additional carbon prices are
implemented and some countries wind back existing mechanisms,” and “no additional
carbon pricing is introduced outside those countries that already have a mechanism inplace or that have been include within global climate commitments.”

Fuel mix

Outcomes associated with “global GHG emissions peak[ing] in 2025” where fossil fuelcomponent of energy supply falls from 80 per cent in 2016 to 60 per cent by 2040 andcontinues to decline,” “energy from fossil fuels remains at 80 per cent of overall energymix,” and “energy mix differs greatly from country to country.”

Trade restrictions

Outcomes associated with “cooperation lead[ing] to minimal protectionism and thedevelopment of new industries, technologies and carbon markets,” “countries go it alone,some introduce trade restrictions and tariffs to protect local industries,” and “tariffs andtrade restrictions are introduced in some countries based on divergence of approaches
to climate change.”

B
State of Climate-Related
Financial Disclosures

Citi

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using
Scenario Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Socio-economics“Population peaks at 9.5 billion in 2070. GDP continues to grow, with average global
income increasing by a factor of 6 by 2100. Developing countries achieve significant
economic growth, reaching current OECD average income levels in the second half of the
century.”

Energy“Use of fossil fuels continues throughout the century, although at declining rates, withthe exception of coal, which rapidly declines to under 2% of the total energy mix by 2030.
Oil demand remains steady through 2030 due to growing demand for liquid fuels in thetransport sector […] Reverse emissions technologies and carbon sequestration throughland use are critical in mitigating the cost of carbon and reducing emissions.”“Use of renewable energy increases, accelerating rapidly after 2030[…]”

Policy“A global carbon price implemented after 2020 is the sole policy instrument for transition
risk in the energy end-use sectors. The given carbon price is assumed to be the sameacross all regions, though regions have differing economic responses to prices.”

OPTrustAppendicesTechnology“The rate of progress and investment in the development of technology to support the
low carbon economy.”

Resource
availability“The impact of chronic weather patterns (e.g. long-term changes in temperature or
precipitation).”Physical damages“The physical impact of acute weather (i.e. extreme or catastrophic events).”

Policy“Collectively refers to all international, national, and sub-national regulation (including
legislation and targets) intended to reduce risk of further man-made climate change.”

Identifies Potential Impacts of Climate-Related Risks or Opportunities
An important use of scenario analysis is to help determine potential impacts of climate-relatedrisks and opportunities on a company’s business, including operational and financial impacts. In
the annex to its 2017 report, the Task Force emphasized that non-financial companies with morethan one billion U.S. dollar equivalent in annual revenue should consider providing information
on potential qualitative or quantitative financial implications of the climate-related scenarios, if
47

For BHP, assumptions relate to its “Global Accord” (2°C) scenario. For BlueScope, assumptions relate to each of its climate-related scenarios.
For Citi, assumptions relate to its transition scenario. For OPTrust, assumptions relate to its four climate change investment risk factors.

The Task Force on Climate-related Financial Disclosures70any. In addition, the Task Force identified four major categories through which climate-related
issues may affect a company’s financial position (major categories of financial impact):

RevenuesExpenditures

Assets and Liabilities



Capital and Financing

Table 3 lists the major categories of financial impact the selected companies described in theirreports, as determined by the Task Force, along with a few excerpts that describe the companies’
impact analysis process.48
Table 3Major Categories of Financial Impact and Impact Analysis Process
Categories

Description of Impact Analysis Process

BHP
Revenues
Expenditures
AssetsA
Introduction

BHP evaluated the impact of its 2°C-aligned scenario on key investment drivers. This included
analysis of potential impact on long-term demand for its commodities and earnings before
interest, tax, depreciation, and amortization (EBITDA).
It identified the critical uncertainties that could impact demand for its commodities in both anorderly and a more rapid transition to a 2°C world and the relative impact of each of these
uncertainties. It also assessed the potential impact of these transitions on demand forcommodities, finding that, for example, there is likely to be upside for copper, high quality ironore, and metallurgical coal whereas there is potential downside for energy coal and crude oil.

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

Citi
AssetsD
Disclosure of Strategy
Resilience Using
Scenario Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

For transition risk, Citi adapted scenario outputs from climate models into financial terms bytranslating outputs into four key risk factors—direct emissions costs, indirect emissions costs,
revenues, and capital expenditures—that drive changes to the financial performance of oil andgas and utilities sector companies under review. This approach allowed Citi to evaluate thescenario-implied probability of default and expected loss to the portfolio under different
transition scenarios.
For physical risk, Citi evaluated both the impact on revenue from incremental (chronic) climatechange factors (e.g., precipitation and temperature) as well as extreme weather events tocalculate the potential period of inoperability if an event occurred at an asset’s location byasset type (e.g., fossil fuel generation, nuclear generation, or hydropower generation).

Oil Search

F
Initiatives Supporting
TCFD

Revenues
Expenditures
AssetsAppendices

Oil Search evaluated specific projects’ viability based on its three scenarios to understand its
key assets’ medium- and long-term profitability. With respect to transition risk, Oil Searchevaluated its Liquid Natural Gas Expansion Project (Elk-Antelope, P’nyang, and foundation fieldgas). Oil Search identified that the project has a positive impact “with an extend[ed] economic
lift of the project by approximately two years” following the IEA New Policies Scenario
assumptions. In contrast, the project would see significant value erosion, but would remain netpresent value-positive in the Greenpeace Advance Energy Revolution (1.5°C) scenario.
The company also addresses specific facilities’ physical risk due to climate-related events todetermine if its facilities can withstand extreme weather events.

Unilever
Revenues
Expenditures

48

Unilever noted that the most significant impacts of both 2°C and 4°C scenarios are on its
supply chain (impacting cost, where costs of raw materials and packaging rise). Under the 4°C
scenario, there is also increased incidence of disruption to manufacturing and distribution due
to extreme weather. On balance, though, Unilever noted “impacts on sales and our own
manufacturing operations are relatively small.”

BHP, Climate Change: Portfolio Analysis, September 29, 2015, pp. 12-15. Citi, Finance for a Climate-Resilient Future: Citi’s TCFD Report, November
13, 2018, pp. 10-12 and 18-19. Oil Search, Climate Change Resilience Report 2017, March 22, 2018, pp. 18 and 27. Unilever, Unilever Annual
Report and Accounts 2018, March 6, 2019, p. 34.

The Task Force on Climate-related Financial Disclosures

71The Task Force recognizes many companies have struggled with determining the potential impact
of climate-related risks on their strategies and operations. As a result, in addition to the summary
provided in Table 3 (p. 71), excerpts from two of the selected companies’ reports are included toprovide further insight on how some companies describe the potential impact of climate-related
issues. In Figure 70, Rio Tinto describes potential impacts on commodities under a 2°C scenario in
the short to medium term and in the long term.
Figure 70

Excerpt from Climate Change Report
Commodity impacts of a 2°C scenario
Commodity
Pilbara ironore

AIntroduction
B
State of Climate-Related
Financial Disclosures

Copper(and battery
materials suchas lithium)

Outlook

Short to medium termLong term

Pilbara iron ore becomes less attractive dueto the effects of increased use of scrap,
however, the business continues to behighlight profitable. Demand for lump andpellet is robust. There is scope to significantly
decarbonize our iron ore mining operations
in order to maintain cost-competitiveness(see Reducing our footprint).
Increased demand for copper as well as otherbattery materials due to greater focus onelectrification. Supply investment expected tolag demand due to long mine development
lead times, resulting in extended periods ofhigh prices.
Emission-reduction policies likely toincrease aluminium prices, benefiting lowcost, low-carbon producers but putting
greater pressure on coal-based smelters
as well as the refineries supporting them.

There is large uncertainty around how thesteel production sector will decarbonise in thelong run, which could materially affect thevalue of Rio Tinto’s iron ore business. In
addition to an escalation of the severity of themedium-term impacts, there is a need to planfor greater frequency and intensity ofcyclones on the Pilbara coast.
Structural increase in demand due to fasterelectric vehicle take-up and investment in
power and the grid, requiring significant new
supply, partially offset by an increase in scrap
collection rates.

C
Adoption and Use of the
TCFD Recommendations

Aluminum(including
bauxite mining
and alumina
refining)

D
Disclosure of Strategy
Resilience Using
Scenario Analysis

Rio Tinto, Our Approach to Climate Change 2018, p. 22

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Structurally steeper global aluminium cost
curve and potential for decarbonisingaluminium smelting direct emissions
using inert anode technology.

In Figure 71, Oil Search describes its evaluation of specific facilities’ exposure to climate-related
physical risk events to determine whether its facilities can withstand extreme weather events.

Figure 71

Excerpt from Climate Change Resilience Report
Physical Climate Risk Assessment
To minimise the physical risk of climate change to Oil Search’s assets, we consider climate risks whendeveloping projects and in our planning procedures. Any potential impacts from climate variability on
new facilities and infrastructure are identified and assessed as part of the engineering risk process,with the outcomes incorporated into engineering design decisions.
For example, in 2017 we assessed potential climate impacts on the Oil Search-operated Kumul Marine
Terminal in PNG to test its climate change resilience. To determine if wave conditions at the Kumul
Marine Terminal would be impacted, the study used projections for elements of PNG’s future climate:annual mean temperatures, extreme high temperatures, average annual rainfall, extreme rain events,
sea level rise and wind storm events.
To test the resilience of the assets under worst-case situations, the study examined high-emission
scenarios, including the Intergovernmental Panel on Climate Change (IPCC) RCP 8.5 path-way. This has
a projected global temperature increase of 3.7°C.
Oil Search, Climate Change Resilience Report 2017, p. 18

The Task Force on Climate-related Financial Disclosures

72

Discloses Potential Strategy Resilience under Different Climate-Related Scenarios
The Task Force’s Strategy c) recommended disclosure calls for companies to describe theresilience of their strategies, taking into consideration different climate-related scenarios. Suchdisclosures are critical in assisting investors and other stakeholders in better understanding thefollowing three factors:The degree of robustness of the company’s strategy and financial plans under different
plausible future climate states of the world;
How the company may be positioning itself to take advantage of opportunities, and its plans
to mitigate or adapt to climate-related risks; andHow the company is thinking strategically about longer-term climate-related risks andopportunities.49

Characteristics of sound disclosures include (1) an evaluation of how the company’s strategy
might perform under each climate-related scenario, (2) identification of key uncertainties
potentially affecting strategic performance and relevant signposts to monitor such uncertainties,and (3) identification of options for increasing the company’s resiliency through adjustments tostrategic and financial plans. Disclosures should promote a constructive dialogue between
investors and the company on the resilience of the company’s strategy under different climaterelated scenarios.

A
Introduction

To varying degrees, the selected companies discussed the resilience of their strategies under the
climate-related scenarios used. Table 4 depicts how the selected companies described strategy
resilience based on potential financial impacts under the various climate-related scenarios.50

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

Table 4Disclosure of Strategy Resilience

D
Disclosure of Strategy
Resilience Using
Scenario Analysis

Disclosures References to Strategy Resilience
BHP“Our analysis shows that the portfolio is resilient due to long-term demand, high-quality resources, low
production costs and rapid payback periods of growth projects. In a 2°C world, we believe there is alikelihood of upside for uranium, high-quality metallurgical coal and iron ore.”E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Oil Search“As highlighted in the 2018 Climate Change Resilience Report, Oil Search’s current and growth assets arehighly robust and would continue to generate positive returns to shareholders under a range of
decarbonisation scenarios, including a 2°C pathway.”F
Initiatives Supporting
TCFD

Rio Tinto

Appendices“We continue to take steps to manage risks and increase the resilience of our business to climate change,
as well as position ourselves for new opportunities […]. Our analysis indicates that Rio Tinto’s business isrelatively robust, including against a 2°C scenario consistent with the goals of the Paris Agreement.”

Unilever“Our analysis shows that, without action, both scenarios present financial risks to Unilever by 2030,
predominantly due to increased costs. However, while there are financial risks which would need to be
managed, we would not have to materially change our business model.”Companies’ disclosure of the resilience of their strategies is a critical element of the TCFD
recommendations, and it is an area where the Task Force believes providing further details anddepth to a company’s discussion around strategy resilience would strengthen disclosures.

49
50

TCFD, Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures, June 29, 2017, p. 29.
BHP, Climate Change: Portfolio Analysis, September 29, 2015, p. 2. Oil Search, Annual Report 2018, March 28, 2019, p. 15. Rio Tinto, Our
Approach to Climate Change, February 27, 2019, p. 36. Unilever, Unilever Annual Report and Accounts 2018, March 6, 2019, p. 34.

The Task Force on Climate-related Financial Disclosures73

Companies with material climate-related risks should consider including additional informationon alternative strategies they considered and how the chosen strategy influences the flexibility,
robustness, and redundancy of critical business processes.

5. Conclusion
To improve the usefulness of disclosures, the Task Force has recommended companies use
scenario analysis as a tool to enhance their strategy formulation processes under conditions of
uncertainty. In the case of climate change, scenarios allow a company to explore and develop anunderstanding of how the physical and transition risks of climate change may affect its
operations, strategies, and financial performance over time. The Task Force believes
understanding how a company thinks its strategy might perform under various climate-related
scenarios is a key component of disclosure to—and dialogue with—investors and otherstakeholders. It allows investors and other stakeholders to understand better the potential
implications of climate change on the company and serves as a basis for a dialogue around acompany’s strategic options.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using
Scenario Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Although several TCFD survey respondents reported using scenario analysis for assessing
strategy resilience, its full integration into corporate planning and disclosure processes appears to
be at early stages for many companies. In particular, the fact that relatively few companies
disclose information related to potential financial impact and strategy resilience across a range ofclimate-related scenarios is an area clearly in need of further work. In part, this may be because
many companies are still learning how to use climate-related scenarios and incorporate scenario
analysis into their strategic planning and risk management processes. Companies also face otherchallenges in adopting scenario analysis, including the need for further tools, business-relevant
data, industry- and sector-specific methodologies, business-relevant climate-related scenarios,and methods to quantify financial impacts.
Work to address some of these challenges is underway. Industry groups and others are working
to improve various aspects of climate-related scenario analysis and climate-related risk
assessment. While these efforts may help to improve the depth and content of disclosuresaround strategy resilience under different climate-related scenarios, the Task Force believes
further work is necessary.
To promote greater adoption of climate-related scenario analysis by companies, the Task Force isconsidering additional work in the following two areas:Additional process guidance around how to introduce and conduct climate-related scenario
analysis andBusiness-relevant and accessible scenarios.

Many existing scenarios, such as those developed by the IEA and IPCC, are largely intended forpolicy and research purposes; they do not lend themselves easily to business-specific applications
in different sectors. More business-relevant scenarios may spur additional adoption of scenario
analysis by lowering implementation costs, improving understanding, and furthering
comparability.
Understanding how a company positions itself strategically to address a range of plausible futureclimate states is a critical area requiring further attention and emphasis in the disclosures ofcompanies most affected by climate change. In considering further work in these two areas, theTask Force’s intent is to address practically some of the key challenges raised by companies using
climate-related scenario analysis, remove barriers to implementing climate-related scenario
analysis, and help provide guidance to broaden and deepen companies’ disclosures around theirclimate-related strategy resilience.

The Task Force on Climate-related Financial Disclosures74

ductionof Climate-Related
cial Disclosurestion and Use of the
Recommendations

osure of Strategy
ience Using
ario Analysis

Perspectives on
ion-Useful Climateed Financial
osures

E User Perspectives
on Decision-Useful
Climate-Related
Financial Disclosures

tives Supporting

ndicesThe Task Force on Climate-related Financial Disclosures

75

E. User Perspectives on Decision-Useful Climate-Related
Financial Disclosures
The purpose of this section is to provide companies that are implementing or considering
implementing the recommendations with examples of climate-related financial disclosures thatan individual investor, portfolio manager, or analyst (user) views as having decision-useful
information aligned with one or more of the Task Force’s recommendations. Each analysis was
prepared by a user from a Task Force member’s company or related organization and represents
the user’s individual views (rather than a consensus view of the users on the Task Force). The
users independently chose and assessed, based on their expertise, the companies anddisclosures discussed in this section.
A key theme from the user assessments included in this section is that specifics matter. Users
often highlighted that they chose these examples because they include detailed information in
key areas they review when making financial decisions, such as who is responsible for managing
climate-related risks and opportunities at the company and how the company’s strategy haschanged because of climate-related risks or opportunities. Users also noted—consistent with theresults of the TCFD survey—that more information on the potential financial impact of climatechange on companies is needed.
A
Introduction

1. Buy Side Analyst’s Perspective on a Materials Company

B
State of Climate-Related
Financial Disclosures

Royal DSM (DSM) is a multinational company in life sciences (nutrition and health) and specialty
materials. The company delivers solutions for human nutrition, animal nutrition, personal care
and aroma, medical devices, green products and applications, and new mobility and connectivity.
DSM and its associated companies delivered annual net sales of about €8.9 billion withapproximately 21,000 employees in 2018. The company is based and listed in the Netherlands.

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Introduction
DSM’s Integrated Annual Report 2018 offers detailed insights into the company’s strategic
progress, business development, financial results and corporate governance, as well as into its
environmental and social performance.51 The sustainability reporting in DSM’s Integrated Annual
Report 2018 has been prepared in accordance with the GRI Standards.
Disclosure Example: Governance
Governance
DSM’s governance framework around all sustainability
Disclose the organization’s governanceissues (which includes climate change) involves thearound climate-related risks andSupervisory Board, the Management Board, as well as
opportunities.
the External Sustainability Advisory Board. On thecorporate level, DSM’s sustainability efforts are driven
by the Sustainability Leadership Team, which is chaired by the Vice President Sustainability andconsists of a group of senior executives representing various divisions within the company.
DSM considers sustainability as one of its core values, and this is reflected in how the company
ties sustainability with financials—including remuneration.
The remuneration of DSM’s Managing Board is based on both short- and long-term goals,
stretching beyond purely financial targets. Fifty percent (50%) of board members’ totalcompensation is a base salary. Variable income (bonuses) makes up the remaining 50% of salary.
Variable income is comprised equally of Short-Term and Long-Term Incentives (Figure 72, p. 77).

51

Royal DSM, Integrated Annual Report 2018, March 2019.

The Task Force on Climate-related Financial Disclosures76

Short-Term Incentives include the proportion of products qualifying as Brighter Living Solutions,
Employee Engagement, and Safety Performance.
Long-Term Incentives include progress in reducing DSM’s greenhouse gas emissions andimproving DSM’s energy efficiency.

Figure 72

Excerpt from Integrated Annual ReportA
Introduction

STI linked to sustainability and individual targets

Long-Term Incentives (LTI)

The part of the STI that is linked to shared sustainability as
well as to individual targets, represents 25% of base salary foron target performance. Further refinement/adaptations of
performance measures in the area of sustainability and theirrelative weight may take place following proper evaluation.
The following shared measures linked to sustainability areapplicable for the STI:

The Managing Board members are eligible to receive
performance-related shares. Under the Performance SharePlan, shares will conditionally be granted to Managing Board
members. Vesting of these shares is conditional on theachievement of certain predetermined performance targets at
the end of a three-year period. The following four performancemeasures are, equally weighted, applicable for the calculationof the vesting of LTI Performance Shares:- Brighter Living Solutions (BLS): percentage of runningbusiness that meets ECO+ and People+ criteria (productsthat offer a better environmental or social benefit comparedto mainstream reference solutions)- Relative Total Shareholder Return (TSR) performanceversus a peer group- Employee Engagement Index: related to the HighPerformance Norm in industry- Safety Performance: defined as Frequency Index for
Recordable Injuries

B
State of Climate-Related
Financial Disclosures- Return on Capital Employed (ROCE) growth- Energy Efficiency Improvement (EEI)- Greenhouse Gas Emissions (GHGE) Efficiency
Improvement

Royal DSM, Integrated Annual Report 2018, p. 133

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Disclosure Assessment: Governance
The fact that DSM's Supervisory Board has appointed its own Sustainability Committee to oversee
progress against targets and report on the embedding of sustainability across the organization
demonstrates that the company takes its climate-related risks, opportunities and commitments
seriously.
This conclusion is further strengthened by the fact that DSM senior management’s remuneration
is directly linked to sustainability targets, including reductions in the emissions of the greenhousegases.
Disclosure Example: Strategy
DSM is explicit about the role of sustainability in its
business strategy (Figure 73, p. 78). During its 2018
Capital Markets Day, the company presented its new
business strategy which couples sustainability impact
with financial performance.52

Appendices

Strategy
Disclose the actual and potential impactsof climate-related risks and opportunities
on the organization’s businesses,
strategy, and financial planning wheresuch information is material.

Climate-related risks are an important part of DSM’s
strategy and form a core of the company’s focus. Apartfrom improving its own carbon footprint through production efficiency and increased usage of
renewable energy, DSM also enables its customers to improve their carbon efficiency.

The company develops and sells various so-called “Brighter Living Solutions”—a term defined by
DSM to denote a product or service that the company deems “measurably better than themainstream solution on the market in terms of their environmental (i.e. CO2 emissions, resource

52

See “DSM strategy update” for more information.

The Task Force on Climate-related Financial Disclosures77extraction, waste etc.) and/or social impact (i.e. criteria such as working conditions and health).”53
Brighter Living Solutions currently account for 62% of DSM’s product portfolio and a vast majorityof its R&D effort.
Finally, DSM is also active in advocating for climate action. Some examples of DSM’s advocacy
work include cooperation with CDP, the Carbon Pricing Leadership Coalition, and the World
Economic Forum CEO Climate Leaders.54

Figure 73

Excerpts from Integrated Annual Report
Sustainability and business
At DSM, sustainability is not only our core value and a key
responsibility; it is also increasingly an important businessdriver that is fully engrained in our strategy, business andoperations. Our approach for bringing about positive change
is to improve, enable and advocate.
Improve is all about the impact of our own operations. In
2018, we continued our sustainable approach to our own
operations. We apply an internal carbon price of € 50 per tonof CO2 to help guide our investments and operational
decisions and are making good progress in reducing our own
greenhouse gas (GHG) emissions. Our GHG efficiency
improved from 26% in 2017 to 33% in 2018 versus our 2008
baseline, strongly outperforming our aspirations. Also, in
absolute terms our emissions fell by more than 8% in 2018.
Last year 41% of our purchased electricity came fromrenewable resources, compared with 21% the year before,
which puts us on track to achieve 75% in 2030. In addition tothis our energy efficiency improved by 1.4% year-on-year,
compared with a 1% average annual target.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Not only do we work hard to improve our own operations; wealso enable our customers to do the same with our innovative
solutions. We ensure that the solutions we offer are better for
people and/or the planet than existing offerings. In 2018, 62%of our sales came from products that have a better
environmental (ECO+) and/or social (People+) impact thanmainstream solutions. We call these our Brighter Living
Solutions. Our innovative solutions are applied within threedomains: Nutrition & Health, Climate & Energy andResources & Circularity. They include our Project Clean
Cow, Veramaris®, fermentative Stevia, Niaga®, light-weightmaterials and green energy projects in solar and bio-based,
which enable our customers and the entire value chain to be
more sustainable. We took further steps to tackle
malnutrition. More than a decade ago, we entered into ourpartnership with the UN World Food Programme (WFP). We
extended this for another three years in 2018, and today
reach over 39 million people worldwide annually withessential nutrients. We have now decided to also address
nutrient deficiency among at-risk populations by means oflocal initiatives, for example, through our Africa Improved
Foods (AIF) project we started in Rwanda, where together
with partners we are working hard to address the issue of
malnutrition and stunting by using local sourcing andproduction.
[…]
We contribute through…
... our Advanced Solar and biofuel solutions which contributeto the uptake and efficiency of renewable energy sources.
… our high-performance materials which improve energy
efficiency in and lower emissions from the automotive,
maritime and food sectors.
… our animal feed solutions (such as Project Clean Cow),
which promote resource efficiency and reducegreenhouse gas emissions.
… advocating for a shift to a low-carbon economy, including
implementing a meaningful price on carbon.

Royal DSM, Integrated Annual Report 2018, pp. 8, 10

Disclosure Assessment: Strategy
DSM is very clear about the role that climate change plays in its business strategy. DSM has
managed to turn climate-related risks into climate-related opportunities by focusing its strategy
on providing products and solutions that enable clients to limit their own carbon footprints. As
carbon prices are widely expected to increase in the coming years, those products and solutions
should become a strong revenue generator for DSM. Furthermore, strong focus on the reductionof its own GHG emissions could help the company to curb costs in scenarios where governments
focus more on climate action and begin to impose additional carbon taxes.

AppendicesFinally, although full disclosure on analysis of climate-related scenarios is still missing, thecompany has announced that it has joined the WBCSD preparer forum for the chemical sector. As
explained in its Integrated Annual Report 2018 (p. 155), scenario analysis will be one of the main
items the forum members will jointly work on.

53

See DSM’s “Enabling the low-carbon economy” for more information.

54

See DSM’s “Advocating climate action” for more information.

The Task Force on Climate-related Financial Disclosures78

Disclosure Example: Metrics and Targets
DSM actively manages and discloses its GHG emissions,
reduction targets, and energy efficiency metrics
stewardship (Figure 74). In 2018, as part of company’s
strategic update, a new target was announced of 30%
absolute reduction of the company’s direct GHG
emissions (Scope 1) and emissions from its purchased
energy (Scope 2), by 2030.

Metrics and Targets
Disclose the metrics and targets used toassess and manage relevant climaterelated risks and opportunities wheresuch information is material.

In addition, DSM has committed to reduce indirect value chain emissions (Scope 3) by 28% per
ton of product produced by 2030. DSM’s targets have been validated to be aligned with the Paris
Agreement by the Science Based Targets initiative.55
Figure 74

Excerpt from Integrated Annual Report

Aspiration

2018

2017

Scope 1 + 2 GHG emissions
We actively manage our absolute GHG emissions reduction,
GHG efficiency and energy efficiency.

Greenhouse gas (GHG)

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis

GHG emissions scope
1 + 2 market-based(million tons)

1.21

1.5

GHG emissions scope
1 + 2 location-based(million tons)

1.41

1.6

GHG emissions scope 3(million tons)

11.3

13.12

GHG efficiency
improvement
versus 2015

25% in 2025

16.6%

8.1%

GHG efficiency
improvement
versus 2008

40–45%
in 2025

33%

26%

Our scope 1 + 2 market-based GHG emissions decreased from1.50 in 2017 to 1.23 million tons of CO2eq in 2018. Our GHG
efficiency improved from 26% in 2017 to 33% in 2018 versus our2008 baseline3. In addition to improvement actions, a large partof the result is due to planned maintenance shutdowns(contributing approximately 150 kt CO2eq). The effect of the
shutdowns is temporary, impacting the year in which the
shutdown was executed. The increased use of renewableenergy (contributing approximately 80 kt CO2eq) resulted in asignificant permanent improvement of our GHG emissions. Theenergy efficiency improvement measures also contributed to theimproved GHG performance. Projects included a switch at DSM
Nutritional Products' site in Kingstree (South Carolina, USA) froma solvent-based to a water-based technology, requiring lessenergy and, consequently generating a smaller environmental
footprint.

EnergyE
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Taking all these different factors into account, we can split thedevelopment of the absolute GHG emissions into an underlying
Energy efficiency
structural improvement (such as contributions from renewable
improvement> 10%
electricity, and energy efficiency gains) and some one-timeversus 2015
in 20255.1%
3.8%3
effects from major plant shutdowns (such as maintenance). The
Purchased electricity
structural improvement gains will vary year-on-year depending
from renewable sources 50% in 2025
41%
21%
on the potential renewable electricity initiatives and themagnitude of the improvement projects executed within the
1 Including a one-time effect of large plant shutdowns in 2018, estimated atcompany. We estimate the effect of the underlying structuralroughly 150 kt. These effects will not take place in 2019.
2 Adjusted using updated emission factors and assumptions.
improvements in absolute GHG emissions to be roughly 8% in
3 The 2017 figure has been adjusted positively because of improved data quality. 2018 versus 2016. The absolute GHG emission reduction (thesum of the structural and one-time effects) amounts toapproximately 18% in 2018 versus 2016.
Primary energy use (PJ)

20.8

23.6

Royal DSM, Integrated Annual Report 2018, pp. 53-54

Disclosure Assessment: Metrics and Targets
DSM’s GHG metrics and targets disclosures are clear and well-communicated. We appreciate
DSM’s attempts and progress at measuring Scope 3 emissions and target setting in line with
Science-Based Targets. Few other competitors are able to measure Scope 3, let alone set targets.

55

See “DSM sets science-based reduction targets for emissions.”

The Task Force on Climate-related Financial Disclosures79Conclusion
DSM is an industry leader with a strategy focused on providing climate (and other) solutions. Its
climate-related disclosures reflect its position. The company is transparent about the level of its
own emissions as well as its actions to reduce them. What makes DSM stand out among many of
its peers is the link that the company makes between climate-related risks with its own ability togrow revenue from products and services that enable the transition to a low-carbon economy.
Still, additional disclosure around scenario analysis—including the potential financial impact ofvarious scenarios (transition as well as physical)—would be welcome.

2. Buy Side Analyst’s Perspective on an Electric Utility Company
Ørsted is a Danish renewable energy company.56 It is a global leader in developing, constructing,and operating offshore wind farms. The company also engages in onshore wind farms, bioenergy
plants and innovative waste-to-energy solutions and provides smart energy products to its
customers. Ørsted is headquartered in Denmark and employs over 6,000 people. The documents
reviewed for this assessment include Ørsted’s Annual Report 2018, ESG Performance Report
2018, and Sustainability Report 2018.57 The areas of focus are disclosures related to the TCFD
recommendations on Strategy and Metrics and Targets.
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

IntroductionØrsted’s Annual Report 2018 (annual report) is an integrated report, combining disclosures ofmaterial financial and non-financial data. It contains four main components: a business review,
governance report, financial statements, and additional information containing the consolidated
ESG statements. Ørsted endorsed the TCFD framework in 2018 and began implementing therecommendations for the first time in the annual report. The company also reports how it
contributes to the United Nations Sustainable Development Goals (UN SDGs) through deploying
renewable energy at scale and decarbonization of its heat and power generation. It conducts amateriality assessment each year that turns the most relevant and material societal challenges
into 20 sustainability programs, each with well-defined targets and management accountability.
Additionally, the company has a detailed ESG Performance Report 2018 (ESG report) andSustainability Report 2018 that contain additional relevant ESG metrics and performance.
Disclosure Example: Strategy
Strategy
In its annual report, Ørsted outlines a vision of “aDisclose the actual and potential impacts
world that runs entirely on green energy” and statesof climate-related risks and opportunities
that climate change is fundamental to the company’son the organization’s businesses, strategy,
business strategy and all its investments. As such, theand financial planning where suchcompany integrates climate-related risks andinformation is material.
opportunities in reviewing and guiding its strategy, insetting performance objectives, and in overseeing
major investments, acquisitions and divestments. More specifically, the company seeks to exploit
climate-related opportunities through the development and construction of renewable heat andpower generation capacity such as offshore wind, solar, and bioenergy. At the same time, it seeks
to reduce both the transition and physical climate-related risks identified over the short, medium
and long term. For example, policies towards increased renewable energy capacity andgeneration and the future competitiveness of green technologies are among some of thetransition risks identified. The company looks to address these by 1) engaging with regulators to
strive for regulatory frameworks that support ambitious renewable capacity build-out and 2)

Ørsted was formerly known as DONG (Danish Oil and Natural Gas) Energy. Following the major strategic transformation from black to green
energy and the divestment of its upstream oil and gas business in 2017, the company changed its name to Ørsted.
57Ørsted, Annual Report 2018, January 31, 2019; Ørsted, ESG Performance Report 2018, January 31, 2019; and Ørsted, Sustainability Report 2018,
January 31, 2019.
56

The Task Force on Climate-related Financial Disclosures80continuously working to improve the future competitiveness of green technologies. In order tomitigate physical risks, the company states that it takes extreme weather conditions and otherrelevant factors into account when designing and constructing its assets. Climate-related risks
and opportunities are also an integral part of the business decisions for investing in new assets ordivesting. For example, the company decided to exit Danish power distribution, residential
customer, and city light businesses in June 2018 to focus on renewable energy assets (Figure 75).
With respect to capital allocation, Ørsted will also be investing the majority of its 2019-2025
capital expenditure (capex) in renewable energy areas (e.g., 75-85% in offshore wind, 15-20% in
onshore wind, 0-5% in bioenergy and customer solutions).

Figure 75

Excerpt from Annual Report
Strategic direction and growth
Our strategic shift from black to green energy is reflectedin our capital base. In 2007, only 16% of our total capital
employed was invested in renewables. In 2018, theshare of renewables had increased to 87%.
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

In addition, our strategic transformation to become agreen energy company has positioned Ørsted as one of
the largest commercial renewable energy companies in
the world, measured by the capacity of renewableenergy that is installed and under construction. By theend of 2018, we had 12GW of renewable energy
capacity installed, under construction, or where a FID
has been taken, with the vast majority being in offshore

Renewables generation

Storagewind. In addition, we have been awarded or contracted
projects with a capacity of 4.8GW where investment
decisions are yet to be taken. Furthermore, we have astrong pipeline of projects under development.
Towards 2030, we expect that the global market for
renewable energy will more than triple to 3,600GW. As
one of the leading companies in renewable energy,Ørsted is strongly positioned to take part in this growth.
We have increased our ambition for offshore wind froma capacity of 11-12GW to a capacity of 15GW by 2025.
By 2030, our strategic ambition is to achieve an installed
renewable capacity of more than 30GW, provided thatthe development creates value for our shareholders.
T&D

Consumption
Wholesale

Offshore wind
Corporate customers

Electricity
storage

Electricity
transmission
anddistribution

Onshore wind

Solar PV

Bioenergy

Invest to grow

Explore potential

Residential customers

Electric heating
Power to gas

Exit

Electric vehicles

No presenceØrsted, Annual Report 2018, pp. 18, 22

Disclosure Assessment: StrategyØrsted’s reports clearly illustrate the company’s strategic transformation path from black to green
energy and lay out its future blueprint for further commitment using clearly-defined emissions
metrics and targets and renewables build-out plans. This allows investors to make betterinformed assessments on how the company is integrating climate-related risks and opportunities
in setting its strategic direction and how it compares to sector peers. The reports containextended discussions on climate change, with reference to third-party science-based analyses(i.e., Paris Agreement, IPCC reports) to highlight the urgency for action and the resulting increase
The Task Force on Climate-related Financial Disclosures81

in potential opportunities in renewable energy. However, investors would benefit from Ørsted
more clearly linking climate-related risks and opportunities to financial impacts on the company.
For example, although the company suggests that a rapid build-out of renewable capacity such as
offshore wind can potentially lower operating costs through scale, the extent of cost savings is
unclear. That said, we understand that the company may not want to disclose such sensitive
information as it closely ties to the competitive contract bidding process. What could further help
investors is disclosure of the country-specific energy policies used to map out the renewables
opportunities so that investors can assess the opportunity set in relation to the 2°C target. We
agree with the Task Force recommendations that including scenario analysis would help investors
better understand the potential financial impacts on Ørsted’s revenues, costs, and earnings.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
AnalysisDisclosure Example: Metrics and Targets
In the annual report, Ørsted reports and sets targets on
green energy share, carbon emissions intensity, andMetrics and Targets
offshore wind capacity (Figure 76). These are also theDisclose the metrics and targets usedcompany’s strategic targets and are newly tied with theto assess and manage relevant climateexecutive compensation. Ten years ago, Ørsted was
related risks and opportunities where
one of the most coal-intensive utilities in Europe, andsuch information is material.
now the company is targeting a complete phase-out ofcoal by 2023. Ørsted’s ESG report also discloses thecompany’s GHG emissions by type (including Scope 1, Scope 2, and Scope 3 emissions), energy
consumption by type, and water stress exposure (Figure 76). The report outlines detailed
accounting policies on the methodologies and calculations for all metrics, which allows for greatercomparability across different companies’ disclosures.

Figure 76

Excerpts from Annual Report and ESG Performance Report
3. Green share of generation, %2.6 Greenhouse gas emissions (GHG)
Indicator

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Unit

2018

2017

%

2016

Total scope 1 GHG emissions Thousand tonnes CO2e

3,483

3,949

(12%)

5,325

- Carbon dioxide (CO2) 

Thousand tonnes CO2e

3,452

3,916

(12%)

5,294

- Methane (CH4) 

Thousand tonnes CO2e

14

16

(9%)

- Nitrous Oxide (N2O) 

Thousand tonnes CO2e

16

16

0%

17

Thousand tonnes CO2e

0.6

0.6

0%

0.2

Thousand tonnes CO2e
Thousand tonnes CO2e

151

101

50%

-

45

223

(80%)

-

Thousand tonnes CO2e

8

7

14%

-

Direct GHG emissions (scope 1) 

- Sulfur hexaflouride (SF6) 

13

Indirect GHG emissions (scope 2) Location based 

4. Carbon emissions, g CO2e/kWhMarket based 
Indirect GHG emissions (scope 3) F
Initiatives Supporting
TCFD

Business travel 

2.11 Water
Indicator

Appendices

Unit

2018

2017

%

2016

Total volume of water withdrawn

Thousand m3

1,380

11%

1,726

- Ground water

Thousand m3

919

1%

1,004

- Municipal water supplies or other public or private water

Thousand m3

461

1,554
931
623

26%

721

Water withdrawal from areas with low stress levels

%

74.4

-

-

-

Water withdrawal from areas with low to medium stress levels

%

25.4

-

-

-

Water withdrawal from areas with medium to high stress levels

%

0.1

-

-

-

Water withdrawal from areas with high stress levels

%

0.1

-

-

-

Water withdrawal from areas with extremely high stress levels

%

0

-

-

Thousand m3

945

Water withdrawal

5. Installed renewable capacity, GW

utilities

Water withdrawal from water stressed areas-

Wastewater discharge

Total volume of wastewater discharge

969

(2%)

850

Ørsted, Annual Report 2018, pp. 26-27
Ørsted, ESG Performance Report 2018, pp. 16, 21

Disclosure Assessment: Metrics and TargetsØrsted’s metrics are in line with TCFD’s recommended metrics for consideration for the Energy
Group, including GHG emissions, energy, and water. The disclosures on Ørsted’s metrics andtargets provide decision-useful insights into how the company is transforming from black to

The Task Force on Climate-related Financial Disclosures82

green energy and the potential climate-related opportunities through offshore wind deployment
or avoided carbon emissions. The company’s targets are stepwise medium- and long-term targets
and give investors better visibility on Ørsted’s pathway to achieving these targets and help
determine management’s track record. For example, in 2006, less than 20% of energy came fromrenewable sources. In 2018, the company has reached 75% and targets over 80% by 2020, over
95% by 2023, and over 99% by 2025. Ørsted has also raised its offshore wind build-out target
from 11-12GW to 15GW by 2025 and targets to reach over 30GW renewable energy by 2030.
Ørsted also puts its targets into context for investors. For example, Ørsted’s green energy sharetarget is above the IPCC’s recommended path for raising the renewable share of global power
generation to limit global temperature increases to 1.5°C (Figure 77). Similarly, the company’s own
carbon intensity of energy generation is well below the International Energy Agency’s 2°C
scenario.
Figure 77

Excerpt from Sustainability ReportA
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesØrsted, Sustainability Report 2018, p. 9

Conclusion
Overall, Ørsted has made laudable efforts to align and implement reporting on climate-relatedrisks and opportunities with the TCFD recommendations during its first year of endorsement. The
reports provide a helpful level of specificity in the information provided around its strategy andclimate-related metrics and targets. Disclosures on the company’s strategic transformation help
investors understand its new growth opportunities. As noted, incorporating a scenario analysis
that reflects the financial impacts of the identified climate-related risks and opportunities would
further help investors.

3. Portfolio Manager’s Perspective on a Utilities Company
The AES Corporation operates as a diversified power generation and utility company. It owns andoperates power plants to generate and sell power to customers, such as utilities, industrial users,
and other intermediaries. The company also owns and operates utilities to generate or purchase,
distribute, transmit, and sell electricity to end-user customers.

The Task Force on Climate-related Financial Disclosures83Introduction
The focus of this review is to assess AES’s disclosure of strategy and consideration of climaterelated scenarios in its November 2018 AES Climate Scenario Report. In this report, AES assesses
its portfolio through stress tests using three climate-related scenarios, providing information inalignment with the TCFD recommendations, and notes that it is the first publicly-traded owner ofutilities and power companies in the U.S. to do so. As part of this report, AES extended thecommitment to building a sustainable organization by reducing its carbon intensity (tons of
CO2/MWh) by 70 percent from 2016 levels by 2030.
AES also expressed how it is fundamentally shifting its portfolio in a manner that both reducescarbon intensity and exposure to carbon price risk. Ultimately, four Clean Energy Growth
Platforms are determined to be core to its strategy: renewables, energy storage solutions,liquefied natural gas (LNG), and energy efficiency.
Disclosure Example: Strategy
Strategy
To stress test58 its portfolio, AES identified third-party
Describe the resilience of the
scenarios covering varying degrees of climate-relatedorganization’s strategy, taking intotransition and physical risk. AES used the International
consideration different climate-related
Energy Agency’s (IEA) 2017 World Energy Outlook (WEO)
scenarios, including a 2°C or lower
for transition risk scenarios, and for physical risk
scenario.
scenarios, they selected the Representative
Concentration Pathways (RCPs) established by theIntergovernmental Panel on Climate Change’s (IPCC) Fifth Assessment Report (AR5). The threestress test scenarios are a “Business as Usual Scenario” of 3-6C, a “Greener Scenario” of 2-3C,and a “1.5-2C Scenario” in line with the TCFD recommendation on Strategy (Figure 78).

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

Figure 78

D
Disclosure of Strategy
Resilience Using Scenario
AnalysisExcerpt from Climate Scenario Report
STRESS TEST SCENARIOS SELECTED

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

AES SCENARIOCONVENTIONF
Initiatives Supporting
TCFD

PHYSICAL RISK(IPCC AR5 scenarios)

Appendices

IMPLICATIONS FOR
BUSINESSES

BUSINESS AS USUAL SCENARIO

GREENER SCENARIO

1.5-2°C SCENARIO

3-6°C
Current Policies Scenario(CPS) | 6.0°C

2-3°C
New Policies Scenario(NPS) | 2.7°C

1.5-2°C
Sustainable Development Scenario(SDS) | 1.5-2.0°C

RCP 8.5 | 3.2-5.5°C

RCP 6.0 | 2.0-3.7°C

RCP 2.6 | 0.9-2.3°C

TRANSITION RISK(IEA WEO 2017 scenarios)

INDICATIONS OF WHAT
THE WORLD WOULD
LOOK LIKE IN 2040

Increased transition risk

Increased physical risk
• Global carbon levels increase by
30%.
• Fossil fuels continue to generate
60% of the world’s power
generation.
• On a trajectory for sea level riseof 0.5-1.0m, more heat waves
and changes in rainfall patternsby 2100.

• Fossil fuels are modestly
reduced to half of the world’s
power generation.

• Global carbon levels decrease by
55% compared to Business as
Usual.

• Renewables share of total
generation increases from 30%
in Business as Usual to 40%.

• Renewable power doubles to 63%
of global generation.

• On a trajectory for sea level riseof 0.32-0.63m.

• Energy efficiency reduces
overall carbon emissions by 44%
compared to the Greener Scenario.

AES, AES Climate Scenario Report, p. 6

AES developed its climate resilience stress test to provide an in-depth financial analysis assessing
the sensitivity of gross margin across its entire business—from every individual plant, up throughits strategic business units. The results of the stress test show simulated gross margin across thethree scenarios for both 2030 and 2040, with a large reduction in conventional power and clean
58

Stress testing is a form of scenario analysis.

The Task Force on Climate-related Financial Disclosures84

energy platforms constituting a significant majority of gross margin under all scenarios andtimeframes (Figure 79). The stress test highlights the effectiveness of the company’s efforts tomitigate climate-related risk given the decreasing portion of its margin that is directly exposed tocarbon pricing as the company moves from the simulated Business as Usual Scenario of 3-6°C tothe 1.5-2°C Scenario.
Figure 79

Excerpt from Climate Scenario Report

SIMULATED GROSS MARGIN ACROSS THE THREE
CLIMATE SCENARIOS
2040

2030
Business as Usual
Scenario(based on IEA’s CPS)AIntroduction
B
State of Climate-Related
Financial Disclosures

2018
Greener Scenario(based on IEA’s NPS)C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Direct Carbon Exposed Margin
for Conventional Power
Other Conventional PowerGross Margin

1.5-2°C Scenario(based on IEA’s SDS)

Regulated Utilities
Clean Energy Growth Platforms

Direct carbon exposed margin largely refers to energy sales from fossil-fired plants that are selling power on the merchant market or plants that are contracted in a
way thatdoes notallow for a carbon price pass-through to an off-taker. Please see Transition Risk Resilience for more information.

AES, AES Climate Scenario Report, p. 7

In addition, on page 6, AES states that its “portfolio is not only resilient, but positioned for growth”
and explains underlying rationale using potential carbon prices and estimates of carbon-exposed
margin (Figure 80, p. 86). This addresses the TCFD recommendation to describe strategic
resilience, taking scenarios into account, and provides confidence to readers of the Climate
Scenario Report due to the inclusion of specific examples. Additionally, AES provides anevaluation of three types of its business including the strengths of each and the impact to each ina 1.5-2°C scenario. Under a 1.5-2°C scenario AES will continue to be a leading provider ofrenewables and by 2040, conventional power (fossil fuel and hydro) will make up a small portionof its portfolio. Even under such scenario, these fossil fuel plants that will continue to operate
under PPAs will continue to receive capacity payments and are expected to continue to provide
reasonable returns.

The Task Force on Climate-related Financial Disclosures

85

Figure 80

Excerpt from Climate Scenario ReportOUR PORTFOLIO IS NOT ONLY RESILIENT, BUT POSITIONED FOR GROWTH
Given our modest exposure to direct carbon risk and our pivot toward Clean Energy
Growth Platforms, transition risk can enhance our upside potential.
The stress test highlights the effectiveness of our efforts to mitigate climate change risk given thedecreasing portion of our margin that is directly exposed to carbon pricing as we move from thesimulated Business as Usual Scenario (3-6°C) to a 1.5-2°C Scenario. In the results that follow, direct
carbon exposed margin refers to margin that has the potential to be directly and negatively affected by,or has been subject to, a price on carbon. Even in the 1.5-2°C Scenario, where carbon prices reach$125/tonne for emerging economies and $140/ tonne for advanced economies by 2040, our direct
carbon exposed margin is virtually zero. Under this scenario, our existing thermal plants are considered
to be retired at the end of their anticipated useful life or contracted for reliability with the off-taker
bearing the cost of carbon. The majority of the margin from these plants comes from capacity
payments, which are not directly carbon exposed. These payments are essentially for availability and arereceived regardless of the amount of energy generated. However, these plants have indirect carbon
exposure if the credit quality of our off-takers deteriorates due to carbon pricing.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

AES, AES Climate Scenario Report, p. 7

Disclosure Assessment: Strategy
The AES climate resilience stress test is especially valuable to users of the Climate Scenario Reportbecause AES was able to separately assess three different scenarios instead of just one. It isuseful to see the potential results of more than one scenario because the stress tests are notintended to be treated as forecasts, either within the company or by readers of its disclosure.
Instead, the scenarios show that AES has given serious consideration to making its strategy
resilient to various future climate-related risks and opportunities.
The stress tests demonstrate to users that AES has enhanced its resilience by taking threestrategic actions: a fundamental shift in its portfolio to clean energy sources and services,
geographical diversification of its exposure, and strong PPA contracts that protect margin. Specificdescriptions of AES’s strategic actions to address climate-related risks and opportunities aredecision useful because they allow users to assess how the company is positioning itself tomitigate carbon policy risks while ensuring a continued focus on predictable cash flows andstrong revenue and margins.
Not only does AES provide an assessment demonstrating that its strategy is likely resilient, it also
provides several key weaknesses to consider and recommendations to improve stress tests,
including:

Detailed and consistent visibility into assumptions and outputs across all three scenarios;Greater country level (and sub-country) specificity;

Increased clarity around assumptions for energy storage and energy efficiency; andQuantitative likelihood or probability measures for severe weather events.

Describing weaknesses and recommendations for improvement can provide confidence to usersthat AES has taken the assessment seriously and intends to continue assessing the resilience of
its strategy in the future. Furthermore, in the future, as third-party established scenarios areenhanced, AES has committed to look to update its modeling and stress tests to take theseenhancements into account.

The Task Force on Climate-related Financial Disclosures86Conclusion
Overall, the AES Climate Scenario Report is comprehensive in its approach to disclosing theresilience of its strategy, including potential strategic actions, while taking into considerationdifferent climate-related scenarios. The disclosure provides decision-useful information bydescribing specific information on stress testing scenarios and AES’s current and future strategy.
In addition, the Climate Scenario Report demonstrates that AES takes climate-related issues
seriously and is dedicated to preparing its business for the future.

4. Credit Analyst’s Perspective on an Oil and Gas Company
Royal Dutch Shell, plc (Shell) is a British-Dutch integrated oil and gas company headquartered in
the Netherlands and incorporated in the United Kingdom. Shell has operations in more than 70
countries and produces 3.7 million barrels of oil equivalent daily alongside its roughly 3 million
barrels per day global refining throughput capacity.
The primary documents reviewed for this assessment were Shell’s 2018 Annual Report and Form
20-F (annual report), which is an integrated report that incorporates by reference Shell’s Energy
Transition Report, its 2017 Sustainability Report, and greenhouse gas emissions webpage.59
The areas of focus for this assessment are disclosures related to the Task Force’s Strategy andMetrics and Targets recommendations.

A
Introduction

Introduction
Shell’s annual report combines financial and non-financial material and contains four major
sections: Strategic Report; Governance; Financial Statements and Supplements, and; Additional
Information. The annual report seeks to incorporate the TCFD’s recommendations, including
discussion of the energy transition and Shell’s portfolio resilience. To that end, Shell joined the Oil
and Gas Preparer Forum, convened by the World Business Council for Sustainable Developmentwith input from the TCFD Secretariat, to identify examples of effective disclosure practices in theoil and gas industry and describe how disclosures may evolve over time.

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Shell provides an appendix to the executive summary of its Energy Transition Report in which it
lists each of the TCFD recommendations and supporting recommended disclosures and provides
listings of reports, publications, and websites that address the specified disclosures. Box 3 (p. 89)
provides excerpts from this appendix related to the Strategy and Metrics and Targets
recommendations. This appendix provides a useful reference to track what the company
discloses and in which documents the disclosures are located.
In its annual report, Shell broadly discusses its governance and management of climate-relatedrisks and opportunities, the risks and opportunities climate change presents its portfolio, its
strategy for adapting its operations to climate change and an accounting of its performance.

AppendicesThis review focuses on Shell’s disclosures on its strategy around identifying and managing
climate-related risks and opportunities and the metrics it uses to assess and manage these risks
and opportunities.

59

Royal Dutch Shell, 2018 Annual Report and Form 20-F, March 14, 2019. Shell’s 2018 sustainability report was not available when this analysis
was prepared.

The Task Force on Climate-related Financial Disclosures87Disclosure Example: Strategy
In discussing its strategy on climate change, Shell
Strategy
identifies four key risks: societal, commercial, regulatory
and physical. It then defines the time horizons it uses forDisclose the actual and potential impacts
business planning and identifying risks—short term (upof climate-related risks and opportunities
to three years), medium term (three years up to aroundon the organization’s businesses, strategy,
10 years), and long term (beyond 10 years). In describing and financial planning where suchinformation is material.
the long term, Shell states its “current portfolio is not
representative of [its] performance or the potential
risks. Decision making and risk identification on the thematic structure of the future portfolio are
guided by associated emerging questions.” This is consistent with the long-term uncertainties
facing the oil and gas sector generally and indicates to readers of its annual report that Shell’sbusinesses are likely to change considerably over the long term.
As part of its long-term strategy, Shell aims to cut its and its customers’ GHG emissions generated
by the production and use of energy from Shell’s products by “around half” from 2017 levels by
2050, with an interim goal of 20% (compared with 2016 levels) by 2035. Shell acknowledges thatits 2050 target is aspirational and that it does not yet have a defined path to reach either its 2035
goal or 2050 goal and that achieving these goals will depend, in part, on “societal progress.”A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesDisclosure Assessment: Strategy
As part of its long-term strategy, Shell provides guidance on its strategic approach and investment
decision-making for its upstream business in its Energy Transition Report, listing the resiliencyenhancing factors it considers when making investment decisions (Figure 81). These criteria help
the reader assess how Shell intends to maintain and grow its existing hydrocarbon businesses ina way that will preserve its competitiveness and returns. They also indicate how the company
plans to improve its GHG intensity and develop clean technologies that might mitigate the carbon
intensity of its oil and gas businesses over the long term. This guidance is limited to the upstream
and there is no comparable framework provided for its other businesses.
Figure 81

Excerpt from Energy Transition Report
We will continue to assess and adjust investments tosustain our oil and gas resources, with significant
flexibility to respond to expected demand, prices andother relevant factors.

Improving capital efficiency to lower break-evenprices;Considering specific performance standards on
CO2 intensity for various asset classes wheninvesting in new assets;

When making investments we consider the following
factors to enhance resilience:

Deploying technologies to further drive resilience,
including the use of CCS and renewables in
Upstream assets;

GHG and energy management to lower CO2
intensity and potential costs from carbon prices inour operating assets.



Short-cycle investment and flexibility to allow
production to increase or decrease in response tochanges in demand or price (for example in
Shales);
Focusing on projects that generate positive cash
flow in a short period of time (for example, byadding new wells to existing deep-water fields);

Royal Dutch Shell, Energy Transition Report, p. 39

The Task Force on Climate-related Financial Disclosures88Box 3

Excerpt from Energy Transition Report
STRATEGY:
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s
businesses, strategy and financial planning, where such information is material.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendicesa) Describe the climate-related risks and opportunities
the organization has identified over the short,medium and long term.

Annual Report (page 65-66): “Our strategy on climatechange”b) Describe the impact of climate-related risks andopportunities on the organization’s businesses,
strategy and financial planning.

Annual Report (pages 65-66): “Our strategy on
climate change”c) Describe the resilience of the organization’s
strategy, taking into consideration different climaterelated scenarios, including a 2°C or lower
scenario.

Shell Energy Transition Report (page 50): “Changing
our portfolio in the long term, after 2030”

CDP submission: describes detailed examples

Shell Energy Transition Report (page 24): “Ourresilience in the medium term, to 2030”

Sky Scenario: describes our scenarios approach

METRICS AND TARGETS:
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities,
where such information is material.
a) Disclose the metrics used by the organization toassess climate-related risks and opportunities, in linewith its strategy and risk management process.

Sustainability Report sections: “Environmental data”
and “Our Executive Scorecard”b) Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions, and therelated risks.

Greenhouse gas webpage: www.shell.com/ghg
provides our performance data on Scope 1, 2 and 3c) Describe the targets used by the organization to
manage climate-related risks, opportunities, andperformance against targets.

Annual Report (pages 65-66): “Our strategy on
climate change”

Shell Energy Transition Report (page 24): “Ourresilience in the medium term, to 2030”

Royal Dutch Shell, Energy Transition Report, p. 77

Disclosure Example: Metrics and Targets
Metrics and Targets
In its Sustainability Report, Shell provides a section titled“Our Performance and Data.” The section provides
Disclose the metrics and targets usedconsiderable data and a downloadable spreadsheet of
to assess and manage relevant
sustainability performance data. The disclosed data cover
climate-related risks andmetrics on a host of topics, including GHG emissions (direct
opportunities where such information
is material.
and indirect) and flaring and energy intensity (see Figure 82,
p. 90). In addition, the spreadsheet provides ten years ofcomparable GHG emissions data with an accompanying explanation of the scope andmethodology. These disclosures are extensive and cover other topics (not shown in Figure 82, p.
90) as well, such as acid gases and VOCs (volatile organic compounds) emissions, ozone-depleting
emissions, spills and discharges, and several metrics around water stewardship.

The Task Force on Climate-related Financial Disclosures

89

Figure 82

Excerpt from Sustainability Report
Environmental data
2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
Greenhouse gas emissions (GHGs)
Direct total GHGs (million tonnes CO2
equivalent) [A]Carbon dioxide (CO2) (million tonnes)
Methane (CH4) (thousand tonnes)[B]
Nitrous oxide (N2O) (thousand tonnes)

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Hydrofluorocarbons (HFCs) (tonnes)
Energy indirect total GHGs (million tonnes
CO2 equivalent) [C]
Flaring
Flaring (Upstream) (million tonnes CO2
equivalent) [D]
Flaring (Upstream) (million tonnes
hydrocarbon flared) [D]Nigeria [E]Rest of the world [E]Energy intensity
Upstream excl. oil sands, LNG and GTL(gigajoules per tonne production) [D], [F]Refineries: Refinery Energy Index [G]Chemical plants: Chemicals Energy Index
[A]

[B]
[C]
[D]
[E]

73

70

72

76

73

72

74

76

69

70

67

68

73

71

69

71

72

66

72

123

138

132

126

120

93

133

128

127

126

1

1

1

1

1

1

1

2

2

2

23

21

18

16

17

23

22

23

25

23

12

11

9

10

10

9

10

9

9

n/c

8.2

7.6

11.8

13.0

7.4

7.7

10.0

10.4

7.8

8.8

2.5

2.3

3.5

3.8

2.1

2.3

3.4

3.6

2.6

2.8

0.8

0.5

0.9

1.3

1.1

1.5

2.0

2.4

1.9

2.3

1.7

1.8

2.6

2.5

1.0

0.8

1.4

1.2

0.7

0.5

1.05

1.02

0.83

0.87

0.89

0.83

0.75

0.74

0.76

0.74

94.8

95.4

95.4

94.9

95.6

98.4 100.8 101.8 102.2

98.9

88.2

91.0

91.6

90.3

89.8

91.7

93.0

90.8

89.3

92.0

75

Greenhouse gas emissions (GHG) comprise carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur
hexafluoride and nitrogen trifluoride. The data are calculated using locally regulated methods where they exist. Where there is no
locally regulated method, the data are calculated using the 2009 API Compendium, which is the recognised industry standard under
the GHG Protocol Corporate Accounting and Reporting Standard. There are inherent limitations to the accuracy of such data. Oiland gas industry guidelines (IPIECA/API/IOGP) indicate that several sources of uncertainty can contribute to the overall uncertainty
of a corporate emissions inventory. 2015-2017 emissions are calculated using Global Warming Potential factors from the IPCC’s
Fourth Assessment Report. Data for prior years were calculated using Global Warming Potential factors from the IPCC’s Second
Assessment Report.
We have updated our 2015-2016 figures following review of data.
These emissions were calculated using the market-based approach in line with the GHG Protocol Corporate Accounting andReporting Standard.
The term upstream in this context includes assets and activities from our Upstream, Integrated Gas and Oil Sands operations.

[F]

Nigeria includes SPDC onshore operations (0.6 million tonnes flared in 2017) and SNEPCo offshore operations (0.1 million tonnes
flared in 2017). Flaring from the Majnoon field in Iraq and from Malaysia amounted to 0.9 and 0.1 million tonnes of hydrocarbons
respectively in 2017. Due to the rounding of numbers, flaring volumes for Nigeria and the rest of the world might not add up to theexact total volume of flaring.
Since 2012, data are prepared in accordance with IPIECA/API/IOGP guidance 2010. Data for prior years are not directly comparable.

[G]

Data are indexed to 2002, based on Solomon Associates Energy Intensity Index 2006 methodology.

Royal Dutch Shell, 2017 Sustainability Report, p. 68

AppendicesDisclosure Assessment: Metrics and Targets
Shell provides a breakdown of its emissions by scope type, which includes emissions underoperational control (100% of emission from companies and joint ventures where it is theoperator) and equity basis (equity share of emissions from companies and joint ventures). The
direct (Scope 1) emissions come from the facilities under the operational control or the equity
boundary. The energy indirect (Scope 2) emissions come from the facilities of others that provide
electricity or heat and steam to our operations.
The company has begun to track Scope 3 GHG emissions—those resulting from the use of Shell’s
products, estimated to be 579 million tonnes in 2017. These data do not appear in the table listing
Scope 1 and Scope 2 GHG emissions, nor is there historical context. Given the very large share of
Shell’s Scope 3 emissions relative to its total Scope 1, Scope 2, and Scope 3 emissions (almost 88%
in 2017), more context around Scope 3 emissions would be helpful. Providing Scope 1, Scope 2,

The Task Force on Climate-related Financial Disclosures90and Scope 3 emissions data is essential in tracking Shell’s progress in achieving its long term
strategic goal to cut its and its customers’ GHG emissions generated by the production and use ofenergy from Shell’s products by “around half” from 2017 levels by 2050.
Shell does provide a useful reconciliation and narrative of changes in Scope 1 and Scope 2
emissions (Figure 83). This analysis helps the reader understand the underlying cause ofincreased emissions in 2017, which is that increased emissions were largely a function of greater
activity rather than higher intensity.

Figure 83

Excerpt from Sustainability Report
The main reasons for the overall increase in our GHG
emissions were the inclusion in our data from May 2017 of
the facility previously operated by the Motiva joint venturein the USA and the return to production of previously
shut-down units at the Bukom site in Singapore. These
increases were partly offset by divestments (for example in
Canada, Gabon, Malaysia and the UK) and reduced
production at our Pearl gas-to-liquids (GTL) plant in Qatar.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

In 2017, around 50% of our direct GHG emissions camefrom our refineries and chemical plants. The production ofoil, gas and GTL products accounted for around 45% of
our GHG emissions, and our shipping activities accounted
for around 2%. We continue to work on improving
operational performance and energy efficiency to manage
GHG emissions.
The indirect GHG emissions associated with the generationof the energy we purchased (from electricity, heat andsteam) were 12 million tonnes on a CO2 equivalent basis in2017 compared with 11 million tonnes CO2 equivalent in2016. The increase is mainly due to the inclusion of former
Motiva refineries and a rise in production at our QGC
facilities in Australia. These emissions were calculated usinga market-based approach, as defined by the World
Resources Institute GHG Protocol.

We estimate that the CO2 emissions from the use of ourrefinery and natural gas products by others were around
579 million tonnes in 2017, which represents less than 2%of the world’s emissions.

GHG movements from 2016 to2017 [A]million tonnes CO2 equivalent
90
85
80
75
70

2017

2016

a

EmissionsdChange in OutputbAcquisitionsecReduction Activities [B]Divestments andOther Reasons[A] Direct and energy indirect greenhouse gas emissions. Numbers havebeen rounded so some totals may not agree exactly.
[B] Does not include 1 million tonnes of CO2 captured and sequestered by
our Quest CCS project in Canada in 2017.

Royal Dutch Shell, 2017 Sustainability Report, p. 57

Appendices5. Buy Side Analyst’s Perspective on a Technology Company
Salesforce is a U.S. customer relationship management (CRM) software company. Since its
inception in 1999, Salesforce has adopted a forward-thinking, innovative approach to the deliveryof technology products and solutions. The multiple cloud-based platforms the company offers
have provided a solution to one of the most pressing business challenges: managing data. In
addition, about a third of the company’s revenue is aligned to the Sustainable Development Goals(SDGs), which serves to highlight the positive momentum behind Salesforce.
Introduction
For this assessment, we have reviewed the company’s 2018 Annual Report, FY18 Stakeholder
Impact Report, CDP Climate Change 2018 Report (CDP Report), and Step Up Commitments
whitepaper and the areas of focus are disclosures related to governance as well as metrics andRoyal
Shell, 2017 Sustainability
Report, p. 57
The Task ForceonDutchClimate-related
Financial Disclosures91

targets.60 Using the company’s reports, we highlight two examples of disclosures that are aligned
to the TCFD recommendations. From our analysis, we view Salesforce as a good performer onenvironmental metrics compared to its peers.
Disclosure Example: GovernancePart of our assessment of Salesforce focused onrecommended disclosure b) under the Governancerecommendation, which asks companies to describe
management’s role in assessing and managing climaterelated risks and opportunities. The guidance related tothis recommended disclosure asks companies to consider
including the following information in their disclosures:A
Introduction

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

whether the organization has assigned climate-related responsibilities to management-level
positions or committees; and, if so, whether such management positions or committees
report to the board or a committee of the board and whether those responsibilities include
assessing and/or managing climate-related issues;a description of the associated organizational structure(s);processes by which management is informed about climate-related issues; and

B
State of Climate-Related
Financial Disclosures

Governancehow management (through specific positions and/or management committees) monitors
climate-related issues.

For Salesforce, the environment is a key stakeholder and it has the power to reduce the impactthat it as a company as well as its customers have on the planet. Indeed, in his annual letter toshareholders, chief executive Marc Benioff highlights the company’s achievements in 2018:

C
Adoption and Use of the
TCFD Recommendations“In fiscal year 2018, Salesforce achieved net-zero greenhouse gas emissions and began delivering
a carbon-neutral cloud for all our customers.”

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Benioff also sets out the company’s ambitions for the future—a goal that is aligned to thecompany’s long-term growth strategy and financial and operational priorities:“We also strive to play a meaningful role in creating a sustainable, low-carbon future by delivering
a carbon neutral cloud, operating as a net-zero greenhouse gas emissions company and byworking to achieve our goal of 100 percent renewable energy for our global operations.”
These powerful statements, which are presented as part of the annual report alongside otherclimate-related information, demonstrate the importance of the environment to the company
and its chief executive.
As shown in Figure 84 (p. 93), Salesforce addresses several elements of the guidance associatedwith disclosing management’s role in assessing and managing climate-related risks andopportunities in its CDP Report.

60

Salesforce, 2018 Annual Report, March 9, 2018; Salesforce, FY18 Stakeholder Impact Report, May 15, 2018; and Salesforce, CDP Report, andSalesforce, “Salesforce’s Step Up Commitments,” September 2018.

The Task Force on Climate-related Financial Disclosures

92

Figure 84

Excerpts from CDP Climate Change Report
Frequency withwhich climaterelated issues
are a scheduled
agenda item

Governancemechanisms
into whichclimate-related
issues areintegrated

Please explain

Scheduled – somemeetings

Reviewing andguiding strategy
Reviewing andguiding majorplans of action

The Governance Committee periodically reviews the Company’senvironmental, social and governance, or “ESG,” initiatives. The
environmental sustainability program is on the agenda at some scheduled
meetings of the Governance Committee. The committee has provided
oversight to review and guide overall environmental strategy and has
reviewed and guided major plans of action. Two senior leaders thatoversee the environmental sustainability program, an Executive Vice
President and Senior Director, provide a report to the Governancecommittee at least once per year on our performance against climate
targets. The most recent report included a review of the current state (twoVirtual Purchase Power Agreements online) and next steps towards
reaching the company’s 100% renewable energy target. The board
committee reviewed and provided feedback on the overall strategy forachieving this goal. Emissions associated with our electricity footprintaccount for 90% of our total emissions, therefore transitioning to lowcarbon sources of energy will help us address our climate-related risks andopportunities.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

Name of the position(s) and/or
committee(s)Responsibility

Frequency of reporting to theboard on climate-related issues

Chief Financial Officer (CFO)

Both assessing and managing climaterelated risks and opportunities

More frequently than quarterly

Other C-Suite Officer, please specify(Chief Philanthropy Officer/EVP Corp
Rel.)full title is "Chief Philanthropy Officer
and Executive Vice President
Corporate Relations"

Both assessing and managing climaterelated risks and opportunities

More frequently than quarterly

Sustainability committee

Both assessing and managing climaterelated risks and opportunities

More frequently than quarterly

Salesforce, CDP Climate Change 2018 Report, item C1.1b and item C1.2

AppendicesDisclosure Assessment: Governance
Salesforce addresses the TCFD recommendation on governance. In particular, the company’s
disclosures allows us to assess the governance and the decision-making authority, theassignment of accountability, and the leadership focused on meeting such requirements.
The company states that there is board-level oversight of climate-related issues. The Nominatingand Governance Committee of the Board of Directors holds meetings regularly to review climaterelated issues. The committee is responsible for ESG issues, of which climate-related issues are
considered to be a key factor for the company. It also has oversight of the environmental
sustainability program. This program is overseen by two senior management figures, an Executive
Vice President and a Senior Director, and they provide a report to the Nominating andGovernance Committee at least annually on the company performance versus its climate targets.

The Task Force on Climate-related Financial Disclosures

93The company states that there is board-level oversight of climate-related issues. The Nominatingand Governance Committee of the Board of Directors holds meetings regularly to review climaterelated issues. The committee is responsible for ESG issues, of which climate-related issues are
considered to be a key factor for the company. It also has oversight of the environmental
sustainability program. This program is overseen by two senior management figures, an Executive
Vice President and a Senior Director, and they provide a report to the Nominating andGovernance Committee at least annually on the company performance versus its climate targets.
The CFO, Chief Philanthropy Officer and Executive Vice President (EVP) of Corporate Relations,and the Sustainability Committee are responsible for assessing and managing climate-relatedrisks and opportunities. They report climate-related issues to the Board of Directors at least
quarterly. Meanwhile, members of the Sustainability Committee span a variety of key business
functions, including, but not limited to, the Risk Management Committee, Real Estate & Workplace
Services, Data Center Infrastructure, Legal, Compliance, and Supply Chain Responsibility,
Procurement. The Salesforce Sustainability Team works with the Salesforce Risk Management
team on an annual basis to evaluate climate-related transition and physical risks across a time
horizon of up to five years, in alignment with their company-wide process. The company’s Risk
Management team subsequently presents the associated risks and opportunities to key
stakeholders within the company highlighting the significance of the risks as appropriate.
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

In addition, Salesforce has acknowledged that the CFO receives non-monetary recognition byincreasing the company’s disclosures of climate-related risks and opportunities. For example, theCFO enjoys a reputation boost when the company reaches a major milestone, such as achieving
net-zero greenhouse gas emissions. Moreover, the bonus of the Chief Philanthropy Officer and
EVP of Corporate Relations is tied to achieving the company’s environmental sustainability goals,
including its net-zero and renewable energy goals. This monetary reward is also applicable toenvironment/sustainability managers that deliver various environmental targets and projects.
We also note that the company’s energy procurement for fiscal year 2018 was reviewed by Ernst& Young. This was included in its Independent Accountants’ Review Report. The company recently
received an A grade standard for 2018, up from B in the previous year, from CDP.
The integration of climate-related issues includes a Sustainability Department: it continually tracks
key environmental metrics that aim to inform decision-makers on the risks and opportunities ofclimate change. Meanwhile, the installation of a blackwater recycling system in the Salesforce
Tower, San Francisco highlights the level at which sustainable low-impact solutions are having an
influence on decision-making. There is also a Sustainability Review Board.
Disclosure Example: Metrics and Targets
Part of our assessment of Salesforce focused onrecommended disclosure c) under the Metrics andTargets recommendation, which asks companies
to describe the targets used by the organization to
manage climate-related risks and opportunities
and performance against targets. The guidance
related to this recommended disclosure is outlined
below.


Metrics and Targets
Disclose the metrics and targets used toassess and manage relevant climaterelated risks and opportunities wheresuch information is material.

Organizations should describe their key climate-related targets such as those related to GHG
emissions, water usage, energy usage, etc., in line with anticipated regulatory requirements
or market constraints or other goals.
In describing their targets, organizations should consider including the following:-whether the target is absolute or intensity based,

The Task Force on Climate-related Financial Disclosures

94



-

time frames over which the target applies,-

base year from which progress is measured, and-key performance indicators used to assess progress against targets.

Where not apparent, organizations should provide a description of the methodologies used
to calculate targets and measures.

Figure 85 and Figure 86 provide excerpts of some of Salesforce’s metrics and targets.
Figure 85

Excerpt from Stakeholder Impact Report
Commitment to Clean and Renewable Energy
The cloud runs on electricity, which today comes
predominantly from the burning of fossil fuels, a major
source of global greenhouse gas emissions.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis

Since making our first public commitment in 2013 toachieve 100% renewable energy for our data centers,
which we expanded to cover our offices in 2015,
Salesforce has focused on procuring electricity fromclean and renewable sources of energy. A little morethan four years later we're proud to be halfway towardthat goal.'

As a cloud leader, we have a responsibility to address ournegative impacts on the climate.
We aim to achieve 100% renewable energy globally on anannual basis. However, the ultimate goal is something
bigger and more complex.

Reaching this goal will take time, the deployment of newtechnologies, financial investment, and regulatorychanges. That's why we engage on key policies that help
enable the clean energy transition.

We focus on directly catalyzing the construction of newsources of clean and renewable energy, whether throughwind and solar contracts or through local utilities.

Reviewed by Ernst & Young LLP. Please refer to pages 51-53 for its Independent Accountants’ Review Report.
1

100% renewable energy here means sourcing renewable electricity from renewable energy sources equivalent to what we use globally on an annual basis.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Salesforce, FY18 Stakeholder Impact Report, p. 19

F
Initiatives Supporting
TCFD

Figure 86

Excerpt from Step Up Commitments

Appendices

Clean Energy
By 2022, achieve 100% Renewable Energy[…]

Sustainable Real Estate
After 2020, all major, new Salesforce office interiors will align with LEED Platinum v4
standards and pursue Net Zero Carbon certification[…]

Supply Chain
By 2025, 50% of Salesforce suppliers (by emissions) to set emissions reduction targets[…]

Salesforce, Step Up Commitments, pp. 1-2
Note: some content, denoted by “[…],” was deleted in order to fit the page

The Task Force on Climate-related Financial Disclosures95

Disclosure Assessment: Metrics and Targets
Salesforce addresses recommended disclosure c) under the Metrics and Targets TCFD
recommendation. In particular, the company's disclosures allow us to assess the company’s longterm ambition in this area.
In March 2013, the company made its first public commitment to achieve 100% renewable energy
for its data centers. This was expanded in 2015 to cover its offices as well. Salesforce has madeprogress: as of fiscal year 2018, it reported that it is halfway towards reaching this goal. In fiscal
year 2018, the company achieved net-zero greenhouse gas emissions and delivered a carbonneutral cloud for customers. In addition, Salesforce participates in a number of environmental
coalitions and working groups, such as:

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures



RE100



Net Zero by 2050



Step Up Declaration

World Green Building Council’s Net-Zero Buildings

Science Based Targets



Responsible Corporate Engagement in Climate PolicyPowering Past Coal AllianceParis Solutions Campaign

Task Force on Climate-related Disclosures

The Corporate Colocation and Cloud Buyers’ Principles

Improve Water Security

In many cases, to become a member of these coalitions and working groups, a company mustmeet specific targets and standards. Salesforce also acted as a founding member of some ofthese initiatives. The depth and breadth of the company’s commitments are significant: they span
supply chain, sustainable real estate, clean energy, transportation, investing in climate impact,water leadership, advocacy, and collaboration. The commitments are outlined in their Step Up
Commitments whitepaper. They state the commitments “have the potential to catalyze thereduction of over 100 million metric tons of greenhouse gas emissions, before 2030.” 61
In 2018, the company completed a climate change risk assessment under a 2°C scenario. In
addition, it increased the levels of disclosure on environmental information within its public filings
including the annual report and proxy statement. The company acquired third-party verification
for its Scope 1, Scope 2, and Scope 3 reported emissions. It also has an absolute emissions target,
which is considered a science-based target.

F
Initiatives Supporting
TCFD
Appendices

Conclusion
Salesforce is a good example of a company whose reporting is in line with the TCFD
recommendations on governance and metrics and targets. That said, there is still room for
improvement, including areas where we have identified the company’s strong business practices.
Overall, we have identified the company as a good performer on environmental metrics
compared to its peers, which in turn contributes positively to our assessment of the corporate
behavior of the company. Corporate behavior is one of six measures that we use to assess acompany’s attractiveness. The environmental characteristics are evaluated against an appropriate
peer group using industry specific metrics.

61

Salesforce, “Salesforce’s Step Up Commitments,” September 2018.

The Task Force on Climate-related Financial Disclosures96

We applaud the steps that Salesforce has taken thus far on sustainability (including climatechange), but encourage them to disclose further details on the specific opportunities that havebeen identified from climate stewardship.

6. Buy Side Analyst's Perspective on an Integrated Oil and Gas Company
Repsol is an international integrated energy company. Its upstream oil and gas business reported
reserves of 2.34 billion barrels of oil equivalent and production of 261 million barrels of oil
equivalent in 2018, with roughly half of this from Latin America, a quarter from North America,
and the rest from Asia and Oceania, Europe, and Africa. It also has a downstream businesscomprising refining, chemicals, trading and gas, marketing, liquefied petroleum gas (LPG), andspecialized products. Within this, Repsol's refining capacity is 370 million barrels of oil equivalent
per year, principally in Spain (88% of refining capacity) as well as Peru (12%).
Introduction
Repsol's Integrated Management Report is the principal source of reference for investors on thegroup's approach to climate change, complemented by the company's Annual Corporate
Governance Report and sustainability reports.62 During 2018, Repsol provided investors with botha strategy update (June 2018) and an ESG investor day presentation (November 2018). Together,
these form the basis of the climate change reporting in the Integrated Management Report. 63

A
Introduction

Repsol describes a clear approach to climate change governance that confirms the ultimate
responsibility of the board and executives for delivery, assessment, and management of climaterelated risks and opportunities.

B
State of Climate-Related
Financial Disclosures

Repsol's updated corporate strategy focuses on increasing its upstream oil and gas production
while also developing increased market share on natural gas in Spain and investments in low
carbon generation. While the corporate strategy is clear on short- and medium-term timeframes
it is much less evident how the company will meet its climate objectives for 2040.

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Repsol has published a short-term target for GHG emissions reduction to 2020 and a longer-term
objective for carbon intensity (including use of products) to 2040. While the company generally
describes scenario analysis work that it has conducted, current disclosure does not provide clarity
on the link between scenario analysis and the selected targets.
Disclosure Example: GovernanceRepsol provides a general description of the constituentsand the activities of its Sustainability Committee, which
has a minimum of three directors, compared to an overallboard size of 14 members, with a majority being external
directors (Figure 87, p. 98). The Sustainability Committee's
duties include:




62
63

Governance
Disclose the organization’s governancearound climate-related risks andopportunities.

shaping of corporate policies, objectives and guidelines on environmental, safety and social
responsibility matters;
analyzing and reporting to the Board of Directors on the expectations of stakeholders andsupervising the relations with them;

proposing the approval of a Sustainability Policy to the Board of Directors; andreviewing and evaluating the management and control systems for non-financial risks.

Repsol, 2018 Integrated Management Report, February 2019 and Repsol, 2018 Annual Corporate Governance Report, February 2019.
Repsol, “Strategic Update,” June 2018 and Repsol, “Walking the Talk on Energy Transition,” November 2018.

The Task Force on Climate-related Financial Disclosures97

Figure 87

Excerpt from Annual Corporate Governance Report
4.5. Sustainability Committee
This Committee is an internal body for information and advisory purposes created by the Board of Directors, without
executive functions, but with information, advisory and proposal powers within its area of activity.
Composition
The Committee consists of no fewer than three Directors, the majority of which must be Non-Executive. Its members areappointed by the Board of Directors, taking into account the expertise, skills and experience of the Directors and the dutiesof the Committee. Members will be appointed for a term of four years. Without prejudice to one or more re-elections, they
will be relieved of their duties at the end of the term, when their tenure as a Director ceases, or when agreed by the Board of
Directors, subject to a prior report by the Nomination Committee. One of the members of this Committee will be appointed
Chairman and the Secretary will be the Secretary to the Board.
The current composition of the Sustainability Committee is as follows:
LUIS CARLOS CROISSIER
BATISTA

Independent

67%

A
Introduction

3

MARIANO MARZOCARPIOB
State of Climate-Related
Financial Disclosuresdirectors

Chairmansince 6/28/2017

Proprietary

33%

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

JOSÉ MANUEL LOUREDA MANTIÑÁN

Category of Directors
Executive

Proprietary

Independent

Other Non-Executive

Competences and activities in 2018
The duties of this Committee include, among others, being familiar with and shaping the Group’s policies, objectives andguidelines on environmental, safety and social responsibility matters, analyzing and reporting to the Board of Directors on
the expectations of the Company’s various stakeholders and supervising the relations with them, proposing to the Board of
Directors the approval of a Sustainability Policy and reviewing and evaluating the management and control systems for nonfinancial risks.
Repsol, Annual Corporate Governance Report 2018, p. 66

Repsol's Annual Corporate Governance Report indicates that during 2018 the Sustainability
Committee reviewed the establishment of climate targets for 2025, analyzed and monitored
performance indicators, and undertook training on energy transition. In addition, the Integrated
Management Report provides commentary on the role of the Executive Committee as it relates toclimate change, including the Executive Committee’s reporting to the board (Figure 88, p. 99).
Repsol states that the Executive Committee has direct responsibility in the management ofmatters related to climate change, including strategic decisions, multi-year objectives, and annual
targets.

The Task Force on Climate-related Financial Disclosures98

Figure 88

Excerpt from Integrated Management Report
Governance in climate change

Board of Directors(2)(1) Proposes climate change strategy and targets,and supervises their implementation.
(2) Approves, at the proposal of the Sustainability
Committee, the climate change strategy.

Sustainability
Committee(3)Audit and Control
Committee(4)Compensation
Committee(5)(3) Oversees the climate change strategy
and periodically reviews emerging
risks associated to climate change(4) Oversees effectiveness of the risk management

Chief Executive
Officer (CEO)(1)

and internal control system, including
emerging risks and climate change risks.

Executive
Committee (EC)(1)(5) Proposes Board and Executive
Management remuneration linked toenergy and climate change targets.
(6) Coordinates and develops with all businessA
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendicesunits the climate change strategy, proposed
targets, and tracking of the action plans.

Technology Development, Resources
and Sustainability Division(6)(7) Implements GHG reduction plans.
(8) Technical unit for the performance of General

Energy and Climate Change(8)Supervises and guarantees,
through the business units, compliancewith the GHG reduction program

Business
units(7)Management, Technology Development,
Resources and Sustainability activities. Also
oversees and ensures compliance with GHG
reduction programs in the businesses.

Repsol, Integrated Management Report 2018, p. 62

Disclosure Assessment: Governance
It is helpful that Repsol makes this link between its board oversight and executive managementwith respect to climate change. The information disclosed aligns with the TCFD recommended
disclosures on governance. Repsol confirms that at least twice a year, or as often as necessary,
the Sustainability Committee and Executive Committee review information on execution of theclimate change and emissions strategy. The Director of Sustainability, who reports directly to theCEO, coordinates the proposed objectives and monitoring of action plans with all business units
involved in developing the climate change strategy.
Repsol provides a general description of how GHG emissions reduction targets impact
remuneration. These are reported as having a weight between 5% and 20% of total company
targets in the variable remuneration of employees up to the Executive Directors. Repsol also has along-term bonus for the 2018-2021 period, of which 5% is linked to compliance with the GHG
emission reduction plan. More details on these targets and relevant performance measureswould be desirable.
Disclosure Example: Strategy
Strategy
Repsol’s business strategy is defined in five-year
Disclose the actual and potential impacts ofplans that are reviewed on an annual basis.
climate-related risks and opportunities on the
Repsol's Integrated Management Report describesorganization’s businesses, strategy, and financial
the strategic plan for the period 2016-2020. This isplanning where such information is material.
based on the strategy update announced in June
2018, which was required because several
strategic targets had been met early and, in the normal course of events, would not have been

The Task Force on Climate-related Financial Disclosures99

presented for another two years. The new strategy includes a component described as "thrivingin the energy transition."With its strategic direction on energy transition, Repsol begins to link its corporate strategy toclimate change. In the short term, this is addressed by actions leveraging competitive advantages,
reducing carbon footprint, and building new capabilities. There is a significant reliance on thecompany developing its existing reserves, increasing upstream production by 5%, with a focus on
natural gas (currently 63% of production but representing 73% of reserves). Alongside this, Repsol
has set GHG emissions reduction targets to reduce carbon intensity by 3% (2016-2020) andabsolute CO2 emissions by 2.1Mt (2014-2020). Repsol also commits capital expenditure of €2.5
billion to low carbon business in the period between 2016-2020.
In the medium term, Repsol provides business level targets to 2025, comprising (1) 25% market
share in wholesale gas in Spain; (2) 5% market share in Spanish retail gas and power; and (3)4.5GW capacity in low carbon generation (Figure 89).

Figure 89

Excerpt from Integrated Management ReportA
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Investments

Topcapability

Roadmap

Wholesale Gas

Wholesale gas and electricity

Low emissions generation

Leverage our industrial self
consumption as the largest gas
consumer in Spain

Strong brand and ~10M clientsbase with direct contact

Technical capabilities
and experience in managing
large scale projects

Create a successful wholesalegas business, ensuring acompetitive gas supply

To become a relevant Spanish
low carbon multi-energy retailer

Develop a strong position in
Spain achieving a low carbon
integrated business

Developing new business throughgas flexibility

Progressively sophisticate ouroffer including advanced energy
services and solutions

Deliver a competitive gas offer
for our future retail clients

Targets
by 2025

Technological vocation oriented
to solar, wind, CCGT and otherlow carbon technologies
Diversify in emerging countries
that yield higher returns

>15%

>5%

2.5M

~4.5 GW

Market share1

Market share2

Clients3

Capacity(1) Market share in Spain includes consumption by our refineries.
(2) Market share in Spain by number of customers.
(3) Not adjusted for dual customers.

Repsol, Integrated Management Report 2018, p. 20

Disclosure Assessment: Strategy
This disclosure shows the preparations that the company is making in the transition of its
business activities towards lower-carbon forms of energy. The focus on natural gas appears to bea sensible approach, but does not radically re-orient the business. It is helpful that targets to
reduce operational GHG emissions accompany this. Investments in retail gas and power, and in
direct forms of renewable energy generation, appear to represent first steps to widen the options
for the company as it steers into a low-carbon economy.
Investors would gain more insight on this longer-term direction if the company were more explicit
in describing the actions, uncertainties, and dependencies with respect to the execution of its
strategy.

The Task Force on Climate-related Financial Disclosures

100

Disclosure Example: Metrics and Targets
Repsol provides additional detail on its GHG
emissions performance and targets for the short,medium, and long term in its Integrated Management
Report.

Metrics and Targets
Disclose the metrics and targets used toassess and manage relevant climate-relatedrisks and opportunities where suchinformation is material.

Repsol provides a graphic—included in Figure 90—
showing its progress on the reduction of GHG
emissions from 2006-2017, and onto this it maps the targets it has for the short term (to 2020)and medium term (to 2025).
Figure 90

Excerpt from Integrated Management Report
Reduction of CO 2e emissions [millions of tons]
Mt CO2e2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-0.5

A
Introduction

-1.0

-1.5

B
State of Climate-Related
Financial Disclosures

-620
-200
Target 2006-2013-2.5 Mt CO2e
-440

-3.0
-3,5

Achieved 2006-2013-3,1 Mt CO2e

-4.0

Progress 2014-2016-1.2 Mt CO2e

-440
-510

-4.5

-220
-380

-310

-5.0
Situation with reduction
actions performed-8.0

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Appendices

-160

-2.5

D
Disclosure of Strategy
Resilience Using Scenario
Analysis

F
Initiatives Supporting
TCFD

-380

-508

-2.0

C
Adoption and Use of the
TCFD Recommendations

2025

Emissionsscenario-270

Target 2014-2020-2.1 Mt CO2eTarget 2018-2025-3 Mt CO2e

Repsol, Integrated Management Report 2018, p. 67

In this section the company also provides detailed figures on Scope 1 (direct) GHG emissions, split
between the upstream business and its different downstream activities (refining, chemical andother). It also provides group-wide figures for Scope 2 (indirect) GHG emissions and Scope 3 forcategories related to purchase of goods and services, transportation and distribution of products,
and emissions deriving from the sale of products (Figure 91, p. 102). In addition, Repsol provides
metrics on energy consumption (by activity), energy intensity (upstream and refining), and GHG
emissions intensity (group, Scope 1, and Scope 2).
For group-wide target setting, Repsol has defined a long-term carbon intensity indicator in termsof tCO2/GJ. This covers GHG Scope 1 (direct) and Scope 2 (indirect) as well as Scope 3, including
GHG emissions resulting from the sale of products. Using this measure, it articulates its targets asfollows:
a short-term target to reduce its carbon intensity by 3% by 2020 and

a long-term intention to reduce its carbon intensity by 40% by 2040.

The Task Force on Climate-related Financial Disclosures101Complementing this, Repsol has stated a target for reducing methane emissions in its operated
assets by 25% by the year 2025.

Figure 91

Excerpt from Integrated Management Report
Scope 1

Our emissions

CH 4: 18.9%

N 2O: 0.2%

2018

Downstream

Scope1(1)(2)

Upstream

Refining

ChemicalOther(4)Total

10.16 Mt

8.82 Mt

3.00 Mt

0.014 Mt

21.9 Mt

CO2

CH4

N2O

CO2

CH4 N2O

59.4%

40.4% 0.2%

99.3% 0.5% 0.2%

73 kt

170 ktCO2

CH4 N2O

CO2

CH4 N2O

CO2: 80.9%

Scope 2
Steam: 27.5%

A
Introduction

2018

B
State of Climate-Related
Financial Disclosures

Electricity: 72.5%

Scope2(1)(3)

99.7%

0.1% 0.2%

99.4%

108 kt

0.04% 0.5%55 kt

406 ktScope3(5)(6)

2018

2017

Indirect CO2 emissions associated with the purchase of goods and services (including hydrogen) (Mt)

8.24(1)

7.84

Transportation and distribution of products(7) (Mt)

0.51

0.52

CO2 emissions deriving from the sale of products(8) (Mt)

148

149

(1) Direct and indirect emissions (Scope 1 and Scope 2) of the Company’s will be verified under international standard ISO 14064-1. Once verification iscomplete, it will be available on repsol.com(2) Scope 1 (direct emissions deriving from Company activity).

C
Adoption and Use of the
TCFD Recommendations(3) Scope 2 (indirect emissions related to purchase from third parties of electrical energy and steam).

D
Disclosure of Strategy
Resilience Using Scenario
Analysis(6) CO2 emissions included in Scope 3 in 2018 relate to an external energy content of approximately 2.21 million TJ.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices(4) Includes LNG, LPG, lubricants and marketing.

(5) In terms of Scope 3 emissions, the following indirect CO2 emissions are considered significant: those associated with the purchase of goods andservices; those associated with the transport and distribution of products and those arising from the marketing of these products, which are themost significant.
(7) These emissions have been calculated with the factors provided by the UK Department for Environment, Food & Rural Affairs (DEFRA) for roadtransport of goods. These factors include the part of the trip made by the truck when empty. In the specific case of rail transport, we have only
included diesel locomotive voyages, which account for 40% of such voyages, thus excluding the remaining 60% of electrical locomotives,
according to the study published by the Rail Transport Observatory in Spain.
() These emissions have been calculated using the methodology published by CDP, following the production method, which includes production from
Exploration and Production (crude, natural gas and liquefied natural gas) and LPG sales, naphta, gasoline, kerosene, gasoil, fuel oil and cokeproduced in our refineries. Emissions from chemical products are not included, as the final figure reported in this category is not significant. To avoid
double accounting, we subtract the amount of crude produced in Exploration and Production that is subsequently processed in our refineries.

Repsol, Integrated Management Report 2018, p. 68

Disclosure Assessment: Metrics and Targets
Repsol's reporting of GHG emissions data is helpful in allowing investors to put current emissions
and future targets and objectives into context. From this, it is possible to get a better
understanding of the source of Repsol's GHG emissions and how these connect to the company’s
emissions reduction actions. The historic emissions reduction chart also makes it clear toinvestors the historic pace of GHG emissions (when climate change was not so much of a focus)
and the extent to which the company is accelerating or slowing its emissions reduction activities
in the coming years. In this case, it is clear that Repsol is aiming to maintain the rate of emissions
reduction. One of the weaknesses of the chart, however, is the absence of explanation as to why
the lines for CO2 reductions are expressed as an area (dark orange). Nevertheless, the messaging
is clear, and nothing suggests that the company cannot achieve these targets.
Where Repsol's discussion of actions and performance becomes less concrete is in how it willachieve its long-term intention of a 40% reduction in carbon intensity (expressed as the ratio of
tCO2e/GJ).
Repsol's disclosure on the process to define this target and the conditions that would be required
to achieve it lacks clarity. The company does reference climate-related scenario analysis work thatit has carried out, but the description of outcomes is limited. Its description of its long-term

The Task Force on Climate-related Financial Disclosures102

intention is limited to an assertion that it is consistent with the Paris Agreement ambition. A closer
connection between scenarios and intention would help investors understand how close Repsol
aims to be to a 2°C outcome.
Furthermore, there are a variety of ways in which an energy company, such as Repsol, could
achieve a carbon intensity objective of this type. These include shrinking the level of investment in
upstream activities, reducing the size of refining operations, or accelerating the growth of lower
carbon energy generation and distribution businesses. Investors would be helped by a clearer
discussion of the relative merits that Repsol's management sees in the individual levers, how they
view their room for maneuvering, and implications for capital allocation.
In addition, one of the ways that Repsol could strengthen its long-term GHG emissions reduction
objective would be to disclose a group figure of carbon intensity on the same basis as its 2040
intention.

7. Buy Side Analyst's Perspective on a Technology Company
SAP is a global software company headquartered in Germany. It is the world’s largest provider ofenterprise application software and serves over 425,000 customers in 180 countries. SAP’s
software is used by 92% of the Forbes Global 2000 companies. This assessment reviews
disclosures in SAP’s 2018 Integrated Report (integrated report) aligned with the TCFD
recommendations related to strategy and metrics and targets.64

A
Introduction
B
State of Climate-Related
Financial Disclosures

Introduction
SAP’s integrated report provides the company’s full year financial, environmental, and social
performance and is designed to comply with the Global Reporting Initiative (GRI) guidance for
integrating material financial and non-financial information. SAP has produced an integrated
report since 2012 and included metrics and targets related to its contribution to the UN SDGs forthe first time in 2018. The report contains five sections: To Our Stakeholders; Combined
Management Report; Consolidated Financial Statements; Further Information on Economic,
Environmental, and Social Performance; and Additional Information.

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

SAP’s integrated report does not appear to have been designed to specifically respond to therecommendations of the TCFD, but due to its long-held commitment to sustainability as a driverof its financial performance, many of the key elements recommended by the TCFD are included.
SAP has provided investors with decision-useful climate-related disclosures in this report byproviding stakeholders with audited Scope 1, Scope 2, and Scope 3 emissions figures (direct,
indirect and supply chain/customer use emissions), setting ambitious targets, and embedding
performance on environmental metrics in its corporate strategy.
Future iterations of SAP’s integrated report could be made even more relevant to investors by
improving presentation of key metrics and progress against targets and by incorporating climaterelated risk into its strategic risk framework. Assessing the resilience of the organization’s strategy
in light of various climate-related scenarios, including a 2C or lower scenario, would help SAP and
its investors to better understand its exposure to climate-related risks and opportunities.

AppendicesDisclosure Example: Strategy
SAP links its sustainability to its corporate performancethroughout its integrated report and demonstrates themechanisms by which sustainability, including climaterelated issues, affect its commercial success. This isevidenced by the letter from CEO Bill McDermott that
opens the report by discussing the importance of64

Strategy
Disclose the actual and potential impactsof climate-related risks and opportunities
on the organization’s businesses, strategy,
and financial planning where suchinformation is material.

SAP, 2018 SAP Integrated Report, February 28, 2019.

The Task Force on Climate-related Financial Disclosures103

customer trust to their success, highlighting, among other things, that “[w]hile growing the entire
size of the company by 10%, we beat our ambition to shrink our carbon footprint by nearly 5%.”The theme continues on page 54 in the Strategy and Business Model sub-section, which includes
a diagram showing the impact on the company noting that its “purpose comes to life through ourcontribution to the SDGs.”
SAP goes further than describing the importance of stewardship of the environment and climaterelated risk to the company’s mission and purpose. The report describes the financial impact ofvarious value drivers, including carbon emissions. SAP identifies that growth is affected byemissions because “…customers increasingly ask their suppliers to act sustainably.” By mapping
the ways in which emission reductions drive value (Figure 92), SAP demonstrates carefulconsideration of climate-related risk and its priority in its strategic planning.
Figure 92

Excerpt from the SAP Integrated Report Website
Connectivity of Financial and
Non-Financial Indicators
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

SAP, Interactive Integrated Report 2018

Another way that the company evidences the role of climate-related risk in its businesses,
strategy, and financial planning is by its commitment to offsetting emissions to reach its targets
and its use of internal carbon pricing for aspects of its carbon footprint, namely business travel,
which according to the interactive chart generator accounts for 64% of its Scope 3 GHG emissions.
On page 78 of the integrated report, SAP states that, “[i]n 2018, we overachieved our annual
target to reduce our emissions to 333 kilotons (kt) of CO2 by 23 kt. This result stems primarily
from compensation with carbon emission offsets. Our focus on carbon emissions has contributed
to a cumulative cost avoidance of €272.8 million in the past three years, compared to a businessas-usual scenario based on 2007.”

The Task Force on Climate-related Financial Disclosures

104

Disclosure Assessment: Strategy
It is clear that sustainability is important to SAP given its reporting and actions. By committing tooffset any overshoot in SAP’s emissions, leadership embeds an organization-wide financial
incentive to reduce emissions. This is supported further by using an internal carbon price applied
to business air travel, which can drive reductions at the business-unit level and earmarks funds
for the purchase of offsets. Internal carbon pricing can be used to communicate the financial
imperative to reduce emissions throughout a large organization like SAP. This approach exhibits
climate leadership and demonstrates to investors that the organization is more likely to beresilient in the face of any forthcoming carbon pricing policy.
The company highlights the significance of environmental sustainability to its business purpose
and the benefits for its competitive position of being a sustainable company and providing
carbon-neutral services to its clients, including its “green cloud.” The company is, however, more
limited in explicitly connecting climate-related risk, including the risks in its supply chain andregulatory risk, to its financial performance. For example, enhancing the list of key strategic
objectives in the integrated report by including objectives related to climate would provide astronger connection between SAP’s strategy and its management of climate-related issues.
SAP links its emissions-reduction efforts directly to its financial performance by modeling thefinancial impact of those reductions on its operating profits. The integrated report states,“[d]ocumenting the financial impact of non-financial indicators helps us move closer to achieving
our sustainability goals. Rather than simply stating the business case for social or environmental
change, we now have the numbers to back it up.” SAP calculates that each 1% reduction in carbon
emissions would result in a €6 million increase in operating profit.65 This serves the dual purposeof showing investors that SAP has carefully considered the impact of carbon emissions on its
business and also provides further data that investors might use as an indication of SAP’s future
performance if it meets its emissions reductions goals.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

SAP has provided investors with decision-useful information in its disclosure of the actual andpotential risks and opportunities associated with climate change. Throughout its report, SAP
highlights the benefits of reducing its carbon footprint, including the impact on employee
engagement, cost reductions in operations, and the market advantage of providing low-carbon
solutions to its customers. SAP has implemented an internal carbon price on some of its
emissions, and it has ambitious annual targets commensurate with its 2025 and 2050 targets, aswell as a robust off-setting program. To enhance these disclosures, SAP’s report would benefit
from scenario analysis, which could demonstrate to investors how its efforts to reduce emissions
and provide low-carbon products might affect its position in a variety of climate change scenarios.
Disclosures in SAP’s integrated report and in its un-audited materials suggest that scenario
analysis could show investors that its efforts to be a sustainable company are likely to reduce its
climate-related risks in the long-term. For instance, analysis presented on SAP’s website suggeststhat the company could be well-positioned in a carbon-constrained, low-warming (1.5C or 2C
scenario) or a high-warming scenario (e.g., 4C). SAP cites research by Accenture which estimatesthat technology could reduce emissions by 12.6 GT by 2030; of which SAP’s products could
account for up to 7.6 GT indirectly. On the other hand, in the Climate Action section of SAP’s
website, the company points to the role its technology could play in adaptation to the effects ofclimate change. Combined with its target setting and quality carbon metrics, SAP could likely
make a compelling case that the company is prepared to weather climate-related risks and seize
opportunities in the transition to a low-carbon economy. Such an analysis would likely also help
the company to refine its strategy by laying out the strategic implications of climate-related risks
and opportunities in the short, medium, and long term.

Appendices65

This is outside the scope of the KMPG Independent Assurance report.

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105

Disclosure Example: Metrics and Targets
SAP’s integrated report provides detailed information on
GHG emissions and performance against emissions targets
for 2018 and in preceding years. Financial andenvironmental disclosures contained in the report areaudited by KPMG. Carbon emissions data are included earlyin the report in the Key Facts section (Figure 93), alongside
key financial information, and are easily accessible toinvestors and other stakeholders seeking to assess SAP’s
exposure to climate-related risk and access data that can beused to compare SAP to other companies.

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

Figure 93

Excerpt from Integrated Report
Environment
Net Greenhouse gas emissions (in kilotons)
Total energy consumption (in GWh)
Total data center electricity (in GWh)AIntroduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

2018

2017

 in %

310
919
318

325
920
265

-5
0
20

SAP, 2018 Integrated Report, p. 4

Following these disclosures, SAP dedicates a section of the Combined Management Report toenergy and emissions, explaining the central role carbon reductions and environmental
stewardship play in its strategy and culture. In that section, SAP details its annual figures for total
net emissions, total energy consumption, data center electricity, and the role of the green cloud
as a key part of its strategy (Figure 94). The report notes, “[a]t SAP, we have tied our businessstrategy to our environmental strategy by creating a “green cloud” powered by 100% renewableelectricity. As more business moves to the cloud, data centers are a key part of how SAP provides
solutions to our customers. By using our green cloud services, customers can significantly reduce
their carbon footprint.”
Figure 94

Excerpt from Integrated Report
Total Net Emissions

Total Energy Consumption

Appendices

In addition to our long-term commitment for 2025, we havederived annual targets for our internal operational steering. In 2018,
we overachieved our annual target to reduce our emissions to 333
kilotons (kt) of CO2 by 23 kt. This result stems primarily fromcompensation with carbon emission offsets. Our focus on carbon
emissions has contributed to a cumulative cost avoidance of €272.8
million in the past three years, compared to a business-as-usual
scenario based on 2007. We achieved 39% of this cost avoidance in
2018.

Strengthening Our “Green Cloud”
At SAP, we have tied our business strategy to our environmental
strategy by creating a “green cloud” powered by 100% renewableelectricity. As more business moves to the cloud, data centers are a
key part of how SAP provides solutions to our customers. By using
our green cloud services, customers can significantly reduce theircarbon footprint. Given the increasing data center capacity and anincreasing energy consumption, our data centers have become a
primary focus of our carbon reduction efforts.

SAP, 2018 Integrated Report, pp. 78-79
The Task Force on Climate-related Financial Disclosures

106

The integrated report also presents SAP’s internal targets related to emissions reductions, which
cover a variety of time horizons. SAP sets commensurate annual targets to guide operational
strategy and measure annual performance. The long-term undertaking to reduce GHG emissions
to the company’s 2000 levels by 2020 was achieved in 2017. In that year, the company announced
a commitment to making its operations (including all direct emissions and select indirect/
customer use emissions) carbon neutral by 2025.
SAP is a member of the Science Based Targets Initiative. The integrated report states, “…we were
the first German company to release a science-based climate target. This target reflects the levelof decarbonization required to keep the global temperature increase below two degrees Celsius
compared to pre-industrial temperatures. At SAP, this corresponds to an 85% reduction in our2016 emissions level by 2050, including energy consumption of our products in use [by] ourcustomers.” By using verifiable and externally audited targets to guide its strategy, SAP gives
investors comfort that they are managing the company’s exposure to climate-related risks andaligning the business strategy to take advantage of climate-related opportunities that may arise.
SAP’s 2018 integrated report website provides an interactive chart generator for six types of data:
revenue, order entry and profitability; liquidity, cash flow, and equity; employees; environment;
financial performance measures; and research and development. In the environment category,users can review Scope 1, Scope 2, and Scope 3 GHG emissions figures from 2000 onward, as wellas energy consumption and renewable energy data (Figure 95).

A
Introduction
B
State of Climate-Related
Financial Disclosures

Figure 95

Excerpt from the SAP Integrated Report Website

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

SAP, Interactive Chart Generator

The Task Force on Climate-related Financial Disclosures

107

Disclosure Assessment: Metrics and Targets
SAP has excelled in disclosing its emissions metrics in its integrated report and associated online
tools. It provides audited Scope 1, Scope 2, and Scope 3 GHG emissions data in line with the GHG
Protocol guidelines. It also sets short-, medium-, and long-term targets including an externallyverified Science Based Target that provides assurance that if SAP achieves its target to reduce
emissions by 85% from 2016 levels by 2050, its emissions will not exceed its proportionate shareof a 2C carbon budget.
Adjustments to the presentation of the emissions data, however, could provide additional
information to help users determine the company’s resilience to climate-related risks and ability
to seize climate-related opportunities. For example, emissions data are mainly presented using
aggregate net emissions (including purchased offsets).66 The net figures are important anddemonstrate a commitment to climate responsibility through offsetting, however, they do notprovide insight into the resilience of SAP’s strategy to climate-related risks. For instance, net
figures reduced significantly by offsets do not represent a full picture of climate-related risk andopportunity. If, for example, a high global carbon price were to take effect, the cost of goods in
SAP’s supply chain could rise significantly. If the company’s strategy relied too heavily on offsets, it
may be more vulnerable than competitors who sought carbon reductions throughout their supply
chains and efficiencies in their own operations. In future iterations of this report, clearer
presentation of the annual gross and net emissions—alongside detail of how those emissions are
distributed throughout the company and supply chain—would help investors assess SAP’s climate
resilience.

A
Introduction
B
State of Climate-Related
Financial Disclosures

SAP provides investors and other stakeholders with useful information on its emissions
calculation methodology. SAP details where it has made estimations, how it manages
comparability over the years, and how it corrects errors and discloses when those occur. Thistransparency, in combination with the fact that the data are independently audited, provides
investors with the confidence to make investment decisions using the data presented.

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

66

SAP’s disclosures could be more useful to investors if they were to share more information about
GHG emissions targets. While they present information about their progress toward the 2025
target to be carbon neutral, it would be helpful to share progress toward achieving the morewide-reaching Science Based Target, which includes Scope 1, Scope 2, and Scope 3 (value chain
and indirect) GHG emissions as well.
Conclusion
Overall, SAP’s report provides detailed and audited disclosures of its climate-related risks and sets
clear and ambitious targets, providing decision-useful information for investors. In reading thereport, investors can also infer that SAP is well-positioned in a carbon-constrained future. By
using specific, time-limited, independently verified targets, the company gives confidence toinvestors that the disclosures are reliable. Clearer presentation of progress against targets would
help investors to evaluate the company’s climate-related performance. Mapping of non-financial
value drivers to financial performance, using internal carbon pricing, and assigning a monetary
value to estimate the impact of carbon reductions on operating profits are all valuable toinvestors seeking to understand SAP’s stewardship of climate-related risks and opportunities. The
report would be strengthened by further disclosure of the basis for some of its calculations. It
could also provide additional decision-useful information by describing the use of climate-related
scenario analysis to show SAP management’s consideration of climate-related risks andopportunities and to communicate its strategy for mitigating climate-related risk and seizing
climate-related opportunities to current and potential investors.

Figure 94 shows GHG emissions for 2018 as 310 kt CO2e, which is a 5% reduction in net emissions from the previous year. For SAP’s grossemissions figures, please see the Further Information section at the end of the report (p. 235). Investors could also find these figures bysumming data in the interactive chart available on the integrated report website.

The Task Force on Climate-related Financial Disclosures108

ductionof Climate-Related
cial Disclosures

F Initiatives
Supporting TCFD

tion and Use of the
Recommendations

osure of Strategy
ence Using Scenario
sisPerspectives on
ion-Useful Climateed Financial
osurestives Supporting

ndicesThe Task Force on Climate-related Financial Disclosures

109

F. Initiatives Supporting TCFD
Today, the TCFD has 785 supporters, including 671 companies and 114 other organizations (e.g.,industry associations, governments). The companies represent a broad range of sectors with a
combined market capitalization of over $9.2 trillion. This includes over 374 financial firms,
responsible for assets of $118 trillion. The TCFD has also received support from governments—
Belgium, Canada, France, Sweden, and the United Kingdom—as well as financial regulators
around the world, including in Australia, Belgium, France, Hong Kong, Japan, the Netherlands,
Singapore, South Africa, Sweden, and the United Kingdom.
Support from market participants continues to play an important role in the adoption of the TCFD
recommendations across industries and regions as does the work of various groups andorganizations with initiatives that facilitate implementation of the recommendations. Section E of
the 2018 status report highlighted many initiatives aimed at helping non-financial companies andfinancial institutions report in line with the TCFD recommendations, most of which are continuing
this work today. In many cases, these initiatives have grown in size and scope and have provided
valuable industry-specific insights for implementing the recommendations. Importantly, they havealso helped participating companies publish initial reports using the recommendations. The
global spread of these initiatives and wide range of companies and organizations working on
TCFD implementation is an indication that the framework will have long-lasting and broad market
implications.

A
Introduction

This section provides updates on existing initiatives and outlines some of the new initiatives andactivities that have been launched since the release of the 2018 status report.67

B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

1. Implementation Initiatives
As support for the TCFD has grown, engagement across company departments has also spread.
This expansion of understanding and acknowledgement of climate-related risks andopportunities has helped spread the message of the TCFD beyond traditional sustainability
groups and is being led by a number of different organizations. In addition to facilitating support
from more than 60 of their members, and producing TCFD guides for finance groups, Accounting
for Sustainability (A4S) has hosted several TCFD implementation workshops around the world forits member base. These events help build support and better climate reporting practices withincorporate finance departments, which, in many cases, are less familiar with climate-related
issues. The Institute of Chartered Accountants in England and Wales (ICAEW) has hosted
workshops and events for its accountant base, which have also traditionally been less familiar
with climate-related issues, to learn about and start implementing the recommendations.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

The World Economic Forum (WEF) has continued to work with members of its Alliance of CEO
Climate Leaders, partnering with law firms to help corporate legal departments better understandclimate-related risks. They have also released climate governance principles, in collaboration with
PwC, for how corporate boards should address climate-related risk. In addition, the American Bar
Association (ABA) Science and Technology Section has publicly supported the TCFD and is working
on continuing legal education events for ABA members to better understand the TCFD
recommendations. Focusing on board engagement, the Institutional Investors Group on Climate
Change (IIGCC) published a guide for trustees and boards of asset owner organizations to address
climate-related risks and opportunities, which builds off of the TCFD recommendations.

Appendices

Filling an important space in financial market infrastructure, in April 2019, S&P Global Ratings
released its Environmental, Social, and Governance Evaluation Analytical Approach. The ESG
Evaluation “is a cross-sector, relative analysis of an entity’s capacity to operate successfully in the
future and is grounded in how ESG factors could affect stakeholders, potentially leading to a67

Given the significant number of references included in this section (denoted in light blue), footnote citations are not included. However, eachof the references is included in Appendix 4: References.

The Task Force on Climate-related Financial Disclosures110material direct or indirect financial impact on the entity.” 68 In addition, if requested, S&P Global
Ratings will evaluate the extent to which a company has adopted the TCFD recommendations.
Continuing work to encourage improved disclosure among specific climate-exposed industries,
the World Business Council for Sustainable Development (WBCSD) has launched two new TCFD
Preparer Forums for the utilities and chemicals industries. Similar to their previous work with oil
and gas companies, WBCSD is helping the forum members work as peers to implement the TCFD
recommendations, advance the use of metrics and scenario analysis, engage with investors andset strong industry-specific examples for other companies to follow. Guidance gleaned from thiswork will be published in the second half of 2019.
Focused on the materials and buildings sector, the International Council for Mining and Metals(ICMM) has continued its work to help members implement the TCFD recommendations throughits TCFD working group. The Minerals Council of Australia is establishing a Forum for Climaterelated Financial Disclosures focused on the Australian mining sector. The forum will progress
knowledge and understanding of the TCFD recommendations and approaches to reporting
against them within the sector and consistent with Australian law and economic structure.
The United Nations Environment Programme Finance Initiative (UNEP FI) has also continued its
work with banks, asset managers, and insurance companies to implement the TCFD
recommendations and provide industry guidance. Similar to the guidance that UNEP FI publishedin 2018 for banks on transition risk and physical risk, UNEP FI recently published an investor guideto scenario analysis, covering 1.5°C, 2°C, and 3°C scenarios, and has guidance for the insurance
industry forthcoming. Additionally, UNEP FI is expanding its banking pilot program, increasing thenumber of participating banks and working on further integrating climate-related information
into financial reporting.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

Also continuing work in the financial sector, the Institute of International Finance's Sustainable
Finance Working Group has a TCFD subgroup focused on initiatives that support members'
implementation of the Task Force's recommendations, including identifying and compiling leading
disclosure practices to support banks' implementation efforts and exploring ways to help address
the lack of data for measuring climate-related risks.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis

The Cambridge Institute for Sustainability Leadership (CISL) has published several reports to help
companies align with the TCFD recommendations. In February 2019, CISL published Physical risk
framework: Understanding the impact of climate change on real estate lending and investment
portfolios and Transition risk framework: Managing the impacts of the low carbon transition on
infrastructure investments. The former explains how financial institutions can take tools from theinsurance industry to conduct climate-related risk analysis, and the latter provides a methodology
for managing risks and capture emerging opportunities from the low-carbon transition. In May
2018, CISL published Sailing from Different Harbours—a review of G20 approaches to TCFD
implementation.; and in November 2018, CISL published reports on embedding environmental
scenario analysis into financial decision-making in Mexico and South Africa.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

In Mexico, new financial initiatives have launched, with the Asociación de Bancos de México (ABM)
and the Inter-American Development Bank (IDB) hosting climate risk workshops with significant
attention placed on the TCFD. This work has helped increase awareness for the TCFD in Latin
America with additional organizations, such as MEXICO2, a subsidiary of the Mexican stock
exchange, Bolsa Mexicana de Valores, bringing the TCFD onto the agenda for their sustainablefinance initiatives.

68

S&P Global Ratings’ ESG Evaluation is not a credit rating, a measure of credit risk, or a component of its credit rating methodology. However,
the information gathered for an ESG Evaluation can inform the credit analysis of rated entities.

The Task Force on Climate-related Financial Disclosures

111

Focusing on global outreach, the World Wildlife Fund (WWF) has hosted several TCFD workshops
from Sweden to Kuala Lumpur, bringing together corporations and financial institutions to takefirst steps in disclosing information in line with the recommendations.
During the second One Planet Summit in September 2018, the One Planet Lab was launched by
the French government as the “ideas laboratory” for the One Planet Summit. It consists of four
working groups covering priority areas: climate, the ocean, biodiversity and finance. Under thefinance working group, there is a subgroup focused on promoting the TCFD recommendations.
Additionally, the One Planet Sovereign Wealth Fund Working Group, made up of six founding
sovereign wealth funds, includes in its guiding principles that sovereign wealth funds should,“encourage the development and adoption of agreed standards and methods that promote thedisclosure of material climate-related data,” for example through the TCFD recommendations.69
Many of the initiatives mentioned have developed guides, tools, and documentation that support
implementation of the recommendations and allow more organizations to take advantage of theinitiatives. These publicly available resources have been compiled on the TCFD Knowledge Hub.
The Knowledge Hub was created by CDSB in 2018 as an online aggregator for publicly available
resources, events, and case studies relating to the TCFD. CDSB and the Knowledge Hub havegreatly increased the number of resources available on the website since it was launched, inparticular on some of the more complex facets of the recommendations such as scenario
analysis. Currently, there are more than 140 resources on the hub that provide guidance on
scenario analysis, out of nearly 500 total resources. The Knowledge Hub is currently undergoingwork to provide more clarity on how individual resources can be used, updating the platform withnew e-learning tools, improved search capabilities, and other key improvements based off of
feedback from the extensive use the platform has received since launching.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

2. Alignment of Reporting Frameworks

D
Disclosure of Strategy
Resilience Using Scenario
Analysis

In its 2018 status report, the Task Force noted that many existing reporting frameworks werebeginning to integrate reporting guidance from the TCFD. This work has helped expand thenumber of companies beginning to report in line with the TCFD, and it has helped alleviate thereporting burden for companies who already use a specific framework for reporting climaterelated information. This alignment effort progressed with the launch of the Corporate Reporting
Dialogue (CRD) Better Alignment Project in November 2018. This project will enable participatingorganizations to map their frameworks to the TCFD recommendations and where possible, aligntheir climate-related metrics across all of their reporting frameworks. The CRD is convened by theInternational Integrated Reporting Council (IIRC), and the Better Alignment Project will be
undertaken by the IIRC, the CDP, the CDSB, the Global Reporting Initiative, and the Sustainability
Accounting Standards Board (SASB). With thousands of companies reporting under theseframeworks and standards, the impact of alignment with the TCFD could have a significant
impact.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Reinforcing the work of the Better Alignment Project, two of the participating organizations—
CDSB and SASB—have also published a TCFD Implementation Guide to enhance robustness,consistency, comparability, and utility of TCFD implementation and reporting. The guide provides
practical implementation steps for companies to integrate the TCFD recommendations into theirreporting and business processes and includes mock TCFD disclosures for reference.
The Principles for Responsible Investment (PRI), which initially integrated the TCFD
recommendations into its 2018 reporting questionnaire on a voluntary basis, has made further
updates to better align the questionnaire with the TCFD recommendations and announced in
February that the PRI questions that align with the governance and strategy recommendations of

69

Founding members include the Abu Dhabi Investment Authority, Kuwait Investment Authority, New Zealand Superannuation Fund, Norges
Bank Investment Management, Public Investment Fund of Saudi Arabia, and the Qatar Investment Authority.

The Task Force on Climate-related Financial Disclosures112the TCFD would become mandatory for all PRI signatories beginning in 2020.70 The CDP, which
also previously updated its questionnaire to include climate change questions in line with the
TCFD recommendations now includes responses to those questions as part of its CDP scoring.
In December 2018, the global insurance companies that constitute ClimateWise revised the
ClimateWise Principles to align fully with the TCFD recommendations. The ClimateWise Principles
are a reporting framework for the insurance industry through which ClimateWise members
report and are benchmarked annually. Starting in 2019, all members reporting against the
ClimateWise Principles will follow the TCFD recommendations.
The 2018 status report referenced exchange groups such as the Sustainable Stock Exchanges
Initiative that have updated their ESG reporting guidance to incorporate the TCFD
recommendations. Led by the London Stock Exchange Group, individual exchanges Bursa
Malaysia and the Hong Kong Exchanges have published ESG reporting guides that provide
suggestions for how their listed companies can use the TCFD recommendations when reporting.
The Corporate Governance Council of the Australian Securities Exchange has also updated its
Corporate Governance Principles and Recommendations to include climate change risk with therecommendation that organizations use the TCFD recommendations to help determine whether
they are exposed to material risks from climate change. Most recently, Nasdaq became a TCFD
supporter and has updated its ESG Reporting Guide which now includes four new recommended
disclosures from the TCFD. These actions from exchanges around the world have potential toinfluence the reporting of the thousands of companies that are listed on supportive exchanges.
Other exchanges such as the Japan Exchange Group and Taiwan Stock Exchange have hosted
TCFD-focused events, further promoting the TCFD recommendations to their listed companies.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

3. Government and Regulatory Efforts
The TCFD remains a voluntary, market-led initiative; however, as the need for more transparency
on climate-related risks and opportunities grows more urgent, government organizations,
including regulators, have taken further measures to understand how the TCFD’s recommended
disclosures could be incorporated into their respective reporting requirements. Importantly, as
the recommendations have now been finalized for nearly two years, non-financial companies andfinancial institutions have had time to begin reporting in line with the recommendations.
Companies have also been able to experiment internally on which approaches for using therecommendations are most useful. In monitoring this initial reporting, government organizations
have access to more information on which methods for reporting exposure to climate-relatedrisks and opportunities are most useful. With this monitoring, many regulatory organizations aretaking steps to further understand what the best approach to mandatory disclosure may be, andover 35 regulators and government organizations from around the world have become TCFD
supporters.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

In January 2019, the European Commission’s Technical Expert Group on Sustainable Financepublished its recommendations in the Report on Climate-Related Disclosures on how the NonFinancial Reporting Directive (NFRD) should incorporate the TCFD recommendations. This report
was open for public consultation, and comments are being reviewed by the European
Commission as it determines how the TCFD recommendations will be integrated into the NFRD.
The NFRD covers over 7,000 companies in Europe, with significant potential to set global reporting
precedents.
Supporting the European Commission’s Action Plan, and in response to the request of theEuropean Commission, the European Financial Reporting Advisory Group (EFRAG) launched a

70

In May 2018, the PRI released guidance for asset owners on implementing the TCFD recommendations,

The Task Force on Climate-related Financial Disclosures

113

Project Task Force on Climate-related Reporting under the European Corporate Reporting Lab tostimulate innovation in climate reporting which will build off of the TCFD recommendations.
In April 2019, the chair of the International Accounting Standards Board noted in a speech thatthe work of the TCFD may help companies meet management commentary requirements interms of how climate change issues may impact their business if that impact is material.
In January 2019, the International Organisation of Securities Commissions (IOSCO) published astatement expressing the importance of considering ESG issues when reporting material
information. In line with the view of the Task Force, IOSCO stated that although ESG factors are
sometimes considered non-financial, there may be material short- and long-term impact on
businesses and investors. Notably, IOSCO referenced the TCFD as a framework for reportingorganizations to consider when disclosing climate-related information, and as IOSCO is comprisedof securities and futures markets regulators from over 100 countries, this statement carries
significant global implications.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

In July 2018, the International Association of Insurance Supervisors (IAIS), a standards-settingorganization of insurance supervisors and regulators, in partnership with the Sustainable
Insurance Forum (SIF), released its Issues Paper on Climate Change Risks to the Insurance
Sector (Issues Paper). The Issues Paper provides an overview and examples of how climatechange risk is currently affecting and may affect the insurance sector in the future and describes
how these developments may be of relevance for the supervision and regulation of the sector.
The Issues Paper also calls attention to the importance of the TCFD recommendations. Building
off the Issues Paper, the IAIS will collaborate with the SIF on a survey and paper examining TCFD
implementation and best practices for the insurance sector.
Specific to the financial sector, the United Kingdom’s (U.K.’s) Financial Conduct Authority (FCA)
published a discussion paper in October 2018 on climate change and green finance. In the paper,
the FCA states that, “[t]here is an opportunity for us to build on the work of the TCFD to helporganisations, including firms, manage the transition to a low-carbon economy and encourage
the financial services industry to consider the impact of climate change.” They went on towelcome input in the context of the TCFD recommendations on new requirements for climaterelated reporting in the financial sector.
Under the U.K. Financial Reporting Council, the Financial Reporting Lab has been running a
project working with investors and companies to identify and encourage best practice reporting,including explanations of business models, stress testing and scenario analysis used in the
preparation of risk and viability reporting, and the reporting of metrics. This project includes
considering how frameworks such as the TCFD’s can contribute to best practice reporting.
In April 2019, the Bank of England Prudential Regulation Authority (PRA) published a supervisory
statement to improve banks’ and insurers’ management of the financial risks from climatechange. Markedly, the statement specifies that, “[t]he PRA expects firms to engage with wider
initiatives on climate-related financial disclosures and to take into account the benefits ofdisclosures that are comparable across firms. Various initiatives have done work on this area. For
example, the ‘Taskforce on Climate-related Financial Disclosures’ published recommendations inJune 2017, and other initiatives have since then provided tools or case studies for organisations
making climate-related financial disclosures. The PRA expects firms to consider engaging with the
TCFD framework and other initiatives in developing their approach to climate-related financial
disclosures.” This statement follows a consultation paper that the PRA released in October 2018,
which highlighted the importance of board-level engagement on climate change.
Recognizing that for the TCFD recommendations to be effective, they must be adopted on a
global scale, the City of London Green Finance Initiative, China Green Finance Committee, and PRI
have continued their TCFD working group, helping British and Chinese member companies

The Task Force on Climate-related Financial Disclosures114

implement the recommendations while also informing each jurisdiction’s environmental
disclosure guidelines. Notably, two additional observers from China have joined the group.
In France, where climate reporting is already required under Article 173, the Autorité des Marchés
Financiers helped lead a TCFD workshop to understand how French companies and financial
institutions were beginning to align their Article 173 reporting with the TCFD recommendations.
Acknowledging that companies may benefit from guidance that provides detailed commentary on
how to implement the TCFD recommendations, the Japanese Ministry of Economy, Trade andIndustry (METI), which launched a TCFD implementation study group last year, has since
published such guidance. Their guidance includes sectoral guidance for five industrial sectors andis also intended to provide evaluative perspectives for financial companies to follow on TCFD
reporting. Published in Japanese and English, the guidance sends a strong signal about climaterelated reporting from the Japanese government, which has made climate change a key priority of
its current G20 presidency.
In alignment with this work, the Japanese Financial Services Agency (JFSA) and METI hosted aseries of conferences on climate-related financial disclosure and scenario analysis in February
2019 to further the mainstreaming of the TCFD recommendations in Japan; and in March 2019,
the Ministry of the Environment (MOE) released a “Practical Guide for Scenario Analysis in linewith TCFD recommendations.”A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

In addition, in May 2019, METI, JFSA, and MOE arranged an industry-led TCFD consortium forsupporters to further promote quality reporting. Japan has the largest number of TCFD
supporters, and this public-private partnership can be seen as a model for promoting adoption of
the TCFD recommendations at a national level. With strong support from the METI, JFSA, andMOE, the consortium aims to facilitate constructive dialogues between institutional investors andfinancial institutions and companies specifically on the climate-related financial disclosures
recommended by the TCFD. Keidanren, the Japanese Business Association, has joined theconsortium as one of the founding members, signaling to Japanese companies the importance ofclimate-related financial disclosure.
In March 2019, the Government of Canada joined the governments of Belgium, France, Sweden,
and the U.K., in announcing support for the TCFD. The Canadian Minister of Finance disclosed in abudget report the government’s intentions to “raise awareness of the importance of tracking,managing and disclosing material climate-related risks and opportunities in a consistent andcomparable way.” The report also noted that, where appropriate and relevant, the government
will encourage adoption of the TCFD recommendations by federal Crown corporations. Thisbuilds on earlier work initiated in Canada to further implementation efforts, such as theestablishment of the Investor Leadership Network. Launched at the 2018 G7 meeting in Canada
and supported by the Canadian government, this network aims to build on existing guidance andbest practices to expand the adoption of the TCFD recommendations and help to direct capital
flows towards sustainable businesses.
In Sweden, where TCFD support is concentrated among financial firms, the Swedish International
Development Cooperation Agency (SIDA), a government agency, has organized TCFD workshops
to bring together Swedish financial firms under the Swedish Investors for Sustainable
Development and corporations that are part of the Swedish Leadership for Sustainable
Development to work on TCFD implementation.
The Network for Greening the Financial System (NGFS), a group of 36 central banks andsupervisors and six observers from international organizations, has stated that the TCFD
recommendations could be a possible solution for a global standardized framework on climaterelated reporting. This was noted in the NGFS’s First Progress Report released in October 2018and has been expanded upon in its most recent report published in April 2019, A call for action:
Climate change as a source of financial risk. In the latter report, the members of the NGFS pledge

The Task Force on Climate-related Financial Disclosures

115

their support for the TCFD, and the NGFS “encourages all companies issuing public debt or equity
as well as financial sector institutions to disclose in line with the TCFD recommendations.” Thisstrong statement is bolstered by the NGFS’s recommendation that “policymakers and supervisors
consider further actions to foster a broader adoption of the TCFD recommendations and thedevelopment of an internationally consistent environmental disclosure framework.” Given the
combined authority of these central banks and supervisors, this work is significant for the global
adoption of the TCFD recommendations in the banking industry and financial sector at large.

4. Initiatives Related to Scenario Analysis
The NGFS’ focus on the use of climate-related scenarios by both financial institutions andauthorities mirrors the attention that has been placed on the topic by many other organizations
that are helping non-financial companies and financial institutions implement the TCFD
recommendations. Recognizing that the process of performing and reporting on scenario analysis
is new for a majority of companies, many industry associations, NGOs, and others are working
with companies to disseminate scenario analysis materials applicable to climate-related issues.
PRI has worked with other organizations to help develop climate-related scenario tools andresources to support asset managers and asset owners’ implementation of the TCFD
recommendations. These include the Paris Agreement Capital Transition Assessment (PACTA), theTransition Pathway Initiative (TPI), and 2 Degrees of Separation. PACTA helps financial institutions
understand whether their fixed income and equities portfolios are aligned with the Paris
Agreement. The TPI provides sector-level analysis of companies’ management of carbon
emissions and alignment with the Paris Agreement. The 2 Degrees of Separation analysis
provides company and industry-level analysis of the oil and gas industry, using asset-level data.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations

The Electric Power Research Institute (EPRI), an industry research group, recently published astudy “to develop a public technical resource that can serve as a scientific foundation for
informed dialogue and decision-making on company climate-related policy scenario analysis andemissions goals.”71 In addition, as part of the Investor Practices Programme, IIGCC publishedclimate scenario guidance for institutional investors.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis

IPIECA, the global oil and gas industry association for environmental and social issues, is also
working to assist its members in implementing the TCFD recommendations. In September 2018, it
published the results of a 31-company survey that identified increased adoption of scenario
analysis. Specific benefits of scenario analysis cited included “greater integration of climate
considerations into strategic decision making and executive incentives,” and “viewed positively byexternal stakeholders,” with 61% of the IPIECA’s survey respondents noting climate change as a
top five area of growing interest by stakeholders and investors.

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

While not specifically a scenario analysis initiative, the Science Based Targets initiative helps
companies implement a low-carbon strategy. Science Based Targets provides companies with apathway to reduce their greenhouse gas emissions in alignment with the Paris Agreement goals
to limit global warming to well below 2°C. The targets are industry specific and address theamount and speed by which emissions need to be reduced, providing practical guidance andsupport for companies who commit to the initiative.

Appendices

71

EPRI is a non-profit, non-advocacy, scientific research organization with a public benefit mandate.

The Task Force on Climate-related Financial Disclosures116Appendices

The Task Force on Climate-related Financial Disclosures

117Appendix 1: Task Force Members
Chairman and Vice Chairs
Michael Bloomberg

Graeme Pitkethly

Chair
Founder
Bloomberg LP and Bloomberg Philanthropies

Vice Chair
Chief Financial Officer
Unilever

Christian Thimann

Yeo Lian Sim

Vice Chair
CEO and Chairman of the Management Board
Athora Germany

Vice Chair
Special Adviser, Diversity
Singapore Exchange

MembersA
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesJane Ambachtsheer

Matt Arnold

Global Head of Sustainability
BNP Paribas Asset Management

Managing Director and Global Head of Sustainable
Finance
JPMorgan Chase & Co.

Wim Bartels

Bruno Bertocci

Partner Corporate Reporting
KPMG

Managing Director, Head of Sustainable Investors
UBS Asset Management

David Blood

Richard Cantor

Senior Partner
Generation Investment Management

Chief Risk Officer, Moody’s Corporation
Chief Credit Officer, Moody’s Investor Service

Koushik Chatterjee

Brian DeeseGroup Executive Director, Finance and Corporate
Tata GroupManaging Director, Global Head of Sustainable
InvestingBlackRockMary Draves

Eric Dugelay

Vice President, Environment, Health, Safety andSustainability
Dow

Partner, Sustainability Services
Deloitte

Takehiro FujimuraThomas Kusterer

General Manager, Corporate Sustainability
Mitsubishi Corporation

Chief Financial Officer
EnBW Energie Baden-Württemberg AG

Diane Larsen

Stephanie Leaist

Audit Partner, Global Professional Practice
EY

Senior Advisor to Canada Pension Plan
Investment Board

Mark Lewis

Eloy Lindeijer

Global Head of Sustainability Research
BNP Paribas Asset Management

Chief, Investment Management, Member
Executive Committee
PGGM

Ruixia Liu

Giuseppe Ricci

General Manager, Risk Department
Industrial and Commercial Bank of China

Chief Refining and Marketing Officer
Eni

The Task Force on Climate-related Financial Disclosures

118

Members (continued)
Martin Skancke

Steve Waygood

Chair, Risk Committee
StorebrandChief Responsible Investment Officer
Aviva Investors

Martin Weymann

Fiona Wild

Head Sustainability, Emerging & Political Risk
Management, Group Risk Management
Swiss Re

Vice President, Sustainability and Climate Change
BHP

Michael Wilkins

Jon Williams

Global Head of Sustainable Finance
S&P Global Ratings

Partner, Sustainability and Climate Change
PwC

Special Adviser
Russell Picot
Chair, Audit and Risk Committee, LifeSight
Board Chair, HSBC Bank (UK) Pension Scheme Trustee
Former Group Chief Accounting Officer, HSBCAIntroduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Secretariat
Mary Schapiro

Curtis Ravenel

Vice Chair of Global Public Policy and Special Advisor
to the CEO and Chairman
Bloomberg LP
Former Chair, U.S. Securities and Exchange
Commission

Global Head, Sustainable Business & FinanceBloomberg LP

Didem Nisanci

Stacy Coleman

Global Head of Public Policy
Bloomberg LP

Managing Director
Promontory Financial Group, an IBM Company

Mara Childress

Jeff Stehm

Director of Public Policy
Bloomberg LP

Director
Promontory Financial Group, an IBM Company

Ani Kavookjian
Sustainable Business & FinanceBloomberg LP

Observers
Joe Perry

Rupert Thorne

Member of Secretariat
Financial Stability Board

Deputy to the Secretary General
Financial Stability Board

The Task Force on Climate-related Financial Disclosures119Appendix 2: Disclosure Selection and Review Methodology
As summarized in Section B. State of Climate-Related Financial Disclosures, the Task Forcedeveloped an approach using artificial intelligence (AI) technology to review information on thealignment of 2016, 2017, and 2018 climate-related financial disclosures with the TCFD
recommendations. This appendix describes the Task Force’s methodology for selecting andreviewing disclosures using AI technology.

1. Companies Included in the Review

A
Introduction

The Task Force reviewed financial filings, annual reports, integrated reports, andsustainability reports of 1,126 large companies from 142 countries in eight industries. Six ofthe eight industries align with groups highlighted in the Task Force’s 2017 report: Banking,Insurance, Energy, Materials and Buildings, Transportation, and Agriculture, Food, and Forest
Products. Two new industries have been added to the review—Technology and Media andConsumer Goods—to incorporate additional large companies that may be exposed toclimate-related risks. The Task Force selected companies included in the AI review using thefollowing methodology.
BState of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices










Identified universe of public companies—companies with public debt or equity—in the eightselected industries. To ensure we captured a representative sample across the industries, we
identified companies in 29 sub-industries loosely based on GICS sub-sectors and industries(Figure A1, p 121).
Ranked companies by size. The Task Force used annual revenue to identify the largest
companies in the 22 non-financial sub-industries and total assets for the seven sub-industries
within banking and insurance.
Selected the 100 largest companies in each of the 29 sub-industries (2,740 in total, as two
categories had fewer than 100 companies available for review).
Removed companies that did not have disclosures available in English.
Removed companies that did not have annual reports available for review in all three years.
This was done to ensure a consistent population of companies and comparable reporting
across all three years. The Task Force was asked to deliver the 2019 status report by early
June 2019, and not all 2018 disclosures were available by the last date that documents wereextracted for review (March 31, 2019).
Removed companies whose reports could not be sufficiently processed (see Processed
Relevant Reports for more information).

This methodology resulted in a final review population of 1,126 companies.
Asset owners and asset managers were excluded from the AI review because, in many cases, thetypes of reports needed are not publicly available. In its 2017 report, the Task Forcerecommended that companies provide climate-related financial disclosures in their public annual
financial filings (or other publicly available corporate reporting). However, the Task Forcerecognized comparable reporting by asset managers and asset owners to their clients andbeneficiaries, respectively, would usually occur in other types of financial reporting and may not
be publicly available. As a result, the Task Force decided to exclude asset managers and asset
owners from the AI review given the lack of a consistent set of public reports in the two industries.
To provide some insight on climate-related financial disclosures by asset managers and asset
owners to their clients and beneficiaries, respectively, the Task Force reviewed responses to theUnited Nations Principles for Responsible Investment (UN PRI) 2018 signatory assessment. The

The Task Force on Climate-related Financial Disclosures120

Task Force recognizes that, in many cases, the responses to the assessment may differ from what
is provided to clients and beneficiaries on a confidential basis.
Figure A1

Industry and Sub-Industry of Companies Selected for Review
Industries

Sub-Industries

Banking
300 Companies‒ Regional Banks‒ Investment and Asset‒ Large, Diversified Banks‒ Multi-line Insurance‒ Life and Health Insurance‒ Property and Casualty Insurance‒ Oil and Gas‒ Reinsurance‒ Utilities‒ Coal‒ Air Freight‒ Rail Transportation‒ Passenger Air Transportation‒ Trucking Services‒ Maritime Transportation‒ Chemicals‒ Automobiles‒ Metals and Mining‒ Construction Materials‒ Real Estate Management andInsurance
337 Companies
Energy300 Companies
Transportation
503 Companies

Materials and Buildings
500 Companies

A
Introduction

Agriculture, Food, & Forest
400 Companies

B
State of Climate-Related
Financial Disclosures

Technology and Media
200 Companies

C
Adoption and Use of the
TCFD Recommendations

Consumer Goods
200 Companies

D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesManagement Firms

Development‒ Capital Goods‒ Beverages‒ Packaged Foods and Meats‒ Agriculture‒ Technology Hardware and‒ Paper and Forest Products‒ Interactive Media and Services

Equipment‒ Consumer Retailing‒ Textiles and Apparel

Total: 2,740 Companies

2. Documents Reviewed
The Task Force focused primarily on companies' fiscal year 2016, 2017, and 2018 financial filings,
annual reports, integrated reports, and sustainability reports. These documents were identified
using the Bloomberg Terminal, and other relevant documents provided in the Terminal werereviewed as available. The Task Force only selected documents available in English. Documents
were categorized by the year of reporting rather than the approach taken in the TCFD 2018 status
report which assessed only the most recently available disclosures.








Financial Filings (including 10-Ks, 20-Fs, annual report and accounts, and registration
documents): Reports that describe companies’ audited financial results under the corporate,compliance, or securities laws of the jurisdictions in which they operate. While reporting
requirements differ internationally, financial filings generally contain financial statements andother information such as governance statements and management commentary.
Annual or Integrated Reports: Reports that describe companies’ activities for the preceding
year (annual reports) or the broader range of measures that contribute to companies’ longterm value and the role they play in society (integrated reports).
Sustainability Reports (including Corporate Social Responsibility (CSR) and Environmental,
Social, and Governance (ESG) reports): Reports that describe companies’ impact on society,often addressing environmental, social, and governance issues.
Other Relevant Documents: Documents available in the Bloomberg Terminal that areassociated with companies’ annual reporting or sustainability.

The Task Force on Climate-related Financial Disclosures1213. Review Methodology
The AI technology used to review disclosures for this report was initially developed for the Task
Force’s 2018 status report and was updated for use in 2019 as described below.72
Trained the AI Technology
The AI technology was based on a set of statistical language models that were trained to answer
questions tied to the recommended disclosures for companies in the review population. The
statistical language models underlying the AI technology were trained using passages of text orexcerpts identified as aligning with the Task Force’s 11 recommended disclosures—“labeled data.”
To collect this “labeled data” for its 2018 status report, the Task Force formed a small group to
manually review publicly available reports from a sample of 150 high-disclosing companies. The
small group agreed to use a common standard for reviewing the reports, which included
narrowing down each recommended disclosure to a single yes-no question (Figure A2). For
example, recommended disclosure a) under the Governance recommendation (Governance a)asks companies to describe the board’s oversight of climate-related risks and opportunities. The
yes-no question for Governance a), Question 1, asked reviewers whether the company describes
the board’s or a board committee's oversight of climate-related risks or opportunities. As part ofthe process the group performed multiple levels of review to ensure consistency in approach.
A
Introduction

Figure A2

AI Review Questions

B
State of Climate-Related
Financial Disclosures#

C
Adoption and Use of the
TCFD Recommendations

Question

Recommended
Disclosure

1 Does the company describe the board’s or a board committee's oversightGovernance a)

2 Does the company describe management’s or a management committee's

Governance b)

3 Does the company describe the climate-related risks or opportunities theStrategy a)

4 Does the company describe the impact of climate-related risks andStrategy b)

5 Does the company describe the resilience of its strategy, taking into

Strategy c)

6 Does the company describe the organization's processes for identifying

Risk Management a)

7 Does the company describe the organization's processes for managing

Risk Management b)

8 Does the company describe how processes for identifying, assessing, andRisk Management c)

9 Does the company disclose the metrics it uses to assess climate-related

Metrics and Targets a)of climate-related risks or opportunities?

D
Disclosure of Strategy
Resilience Using Scenario
Analysisrole in assessing and managing climate-related risks or opportunities?
organization has identified?

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

opportunities on the organization (e.g. businesses, strategy, or financial
planning)?
consideration different climate-related scenarios, including a 2°C or lower
scenario?

F
Initiatives Supporting
TCFD

and/or assessing climate-related risks?

Appendicesclimate-related risks?

managing climate-related risks are integrated into the organization's
overall risk management?
risks or opportunities?

10 Does the company disclose Scope 1 and Scope 2, and, if appropriate Scope Metrics and Targets b)
3 greenhouse gas (GHG) emissions?

11 Does the company describe the targets it uses to manage climate-related

Metrics and Targets c)risks or opportunities?

72

Please refer to the Task Force’s 2018 report for additional information on the development of the AI technology in 2018.

The Task Force on Climate-related Financial Disclosures

122

The “labeled data” was then used to train the AI technology to generalize these humanjudgements to a much larger set of company reports beyond the initial manually reviewed set.
For the reports reviewed by the AI technology, passages of text were assigned a “yes” or “no” foreach review question using judgements that are consistent with the training provided by thehuman reviewers. Importantly, this approach was not designed to assess the quality ofcompanies’ climate-related financial disclosures, but rather to provide an indication of thealignment of existing disclosures with the Task Force’s 11 recommended disclosures.
For the 2019 status report, the AI technology went through a second iteration of training tofurther improve performance. For each recommended disclosure, passages of text wereextracted from the AI review at various confidence levels (e.g., passages that were assigned a“yes” with high or low confidence and a “no” with high or low confidence). Reviewers from the AI
team then validated these passages by providing “yes” or “no” judgments consistent with theprevious manual review process. This generated thousands of additional labels that were used toretrain the initial models and increase confidence in the validity of the results.

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Processed Relevant Reports
The Task Force used an automated process to extract passages of text from companies’ reports
for the AI technology to review. In some cases, the content of a report could not be sufficiently
converted from the original document into the necessary text format. In cases where none of acompany’s reports were available in English, or where they could not be sufficiently converted
into text format, those companies were removed from the review population. Ultimately, over 51
million passages of text were converted for review.
Validated the AI Results
The AI technology allocated each passage of text with aprobability score for each recommended disclosurethat indicates the likelihood it would be assigned a “yes”
by a human reviewer. The passages were thencategorized as either positive or negative results foreach recommended disclosure depending on whether
that score was over or under a specific confidence level.
Each report was marked as having a TCFD-aligned
disclosure if at least one passage was categorized as apositive result. Likewise, a company was then marked
as having a TCFD-aligned disclosure if at least one
report was categorized as a positive result.

Figure A3

Company-Level ConfidenceIntervals (CI)
Recommended
Disclosure
CI (+/-)

Governance
a

2.3%


Governance
b

2.3%

 a
Strategy

2.0% bStrategy

2.8% cStrategy

1.2%

Risk Management
a

1.3%


Performance and predictive accuracy for each of the
Risk Managementbmodels can be assessed by comparing what the AI
Risk Managementcgenerates as predictions to the judgements from and Targets ahuman reviewers. Two main sources of human reviews
Metrics
were available, the initial full manual review of 150
 and Targets b
Metrics
companies and the manual reviews of individual and Targets c
Metrics
passages identified using the AI review results across awider set of companies. Figure A3 provides theconfidence intervals calculated from that exercise,presented at the company level for each of the recommended disclosures.

1.6%
1.5%
1.9%
1.2%
1.7%

Applied AI Models to Review Population
Finally, the revised AI models were applied to excerpts from the reports of the 1,126 companies,
and the results were aggregated for analysis by the 11 recommended disclosures, the eightindustries, the size of the companies, and by the regions in which the companies were located.

The Task Force on Climate-related Financial Disclosures

123Appendix 3: Glossary and Abbreviations
Glossary
ANNUAL OR INTEGRATED REPORTS refer to reports that describe companies’ activities for the preceding
year (annual reports) or the broader range of measures that contribute to companies’ long-term value and therole they play in society (integrated reports).
BOARD OF DIRECTORS (or BOARD) refers to a body of elected or appointed members who jointly oversee
the activities of a company or organization. Some countries use a two-tiered system where “board” refers to
the “supervisory board” while “key executives” refers to the “management board.”73
CLIMATE-RELATED OPPORTUNITY refers to the potential positive impacts related to climate change on acompany or organization. Efforts to mitigate and adapt to climate change can produce opportunities forcompanies, such as through resource efficiency and cost savings, the adoption and utilization of low-emission
energy sources, the development of new products and services, and building resilience along the supply
chain. Climate-related opportunities will vary depending on the region, market, and industry in which anorganization operates.
CLIMATE-RELATED RISK refers to the potential negative impacts of climate change on a company ororganization. Physical risks emanating from climate change can be event-driven (acute) such as increased
severity of extreme weather events (e.g., cyclones, droughts, floods, and fires). They can also relate to longerterm shifts (chronic) in precipitation and temperature and increased variability in weather patterns (e.g., sealevel rise). Climate-related risks can also be associated with the transition to a lower-carbon global economy,
the most common of which relate to policy and legal actions, technology changes, market responses, andreputational considerations.

A
Introduction
B
State of Climate-Related
Financial Disclosures

DECARBONIZATION refers to a decrease in the “average carbon intensity of primary energy over time.”74

C
Adoption and Use of the
TCFD Recommendations

FINANCIAL FILINGS refer to the annual reporting packages in which companies are required to deliver theiraudited financial results under the corporate, compliance, or securities laws of the jurisdictions in which they
operate. While reporting requirements differ internationally, financial filings generally contain financial
statements and other information such as governance statements and management commentary.75

D
Disclosure of Strategy
Resilience Using Scenario
Analysis

FINANCIAL PLANNING refers to a company’s consideration of how it will achieve and fund its objectives andstrategic goals. The process of financial planning allows companies to assess future financial positions anddetermine how resources can be utilized in pursuit of short- and long-term objectives. As part of financial
planning, companies often create “financial plans” that outline the specific actions, assets, and resources(including capital) necessary to achieve these objectives over a 1-5 year period. However, financial planning isbroader than the development of a financial plan as it includes long-term capital allocation and otherconsiderations that may extend beyond the typical 3-5 year financial plan (e.g., investment, research anddevelopment, manufacturing, and markets).

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

GOVERNANCE refers to “the system by which an organization is directed and controlled in the interests ofshareholders and other stakeholders.”76 “Governance involves a set of relationships between an organization’s
management, its board, its shareholders, and other stakeholders. Governance provides the structure andprocesses through which the objectives of the organization are set, progress against performance ismonitored, and results are evaluated.”77

Appendices

GREENHOUSE GAS (GHG) EMISSIONS SCOPE LEVELS78


Scope 1 refers to all direct GHG emissions.



Scope 2 refers to indirect GHG emissions from consumption of purchased electricity, heat, or steam.

OECD, G20/OECD Principles of Corporate Governance, OECD Publishing, Paris, 2015.
IPCC, “3.4.1.1 Decarbonization trends,” Climate Change 2007: Working Group III: Mitigation of Climate Change, 2007.
75
Based on Climate Disclosure Standards Board, “CDSB Framework for Reporting Environmental Information, Natural Capital and AssociatedBusiness Impacts,” April 2018.
76
A. Cadbury, Report of the Committee on the Financial Aspects of Corporate Governance, London, 1992.
77
OECD, G20/OECD Principles of Corporate Governance, OECD Publishing, Paris, 2015.
78
World Resources Institute and World Business Council for Sustainable Development, The Greenhouse Gas Protocol: A Corporate Accounting andReporting Standard (Revised Edition), March 2004.
73
74

The Task Force on Climate-related Financial Disclosures

124



Scope 3 refers to other indirect emissions not covered in Scope 2 that occur in the value chain of thereporting company, including both upstream and downstream emissions. Scope 3 emissions could
include: the extraction and production of purchased materials and fuels, transport-related activities invehicles not owned or controlled by the reporting entity, electricity-related activities (e.g., transmission
and distribution losses), outsourced activities, and waste disposal. 79

MANAGEMENT refers to those positions a company or organization views as executive or senior
management positions and that are generally separate from the board.
RISK MANAGEMENT refers to a set of processes that are carried out by a company or organization’s board
and management to support the achievement of its objectives by addressing its risks and managing the
combined potential impact of those risks.
SCENARIO ANALYSIS is a process for identifying and assessing a potential range of outcomes of future events
under conditions of uncertainty. In the case of climate change, for example, scenarios allow an organization to
explore and develop an understanding of how the physical and transition risks of climate change may impact
its businesses, strategies, and financial performance over time.
SCIENCE BASED TARGETS are targets adopted by companies to reduce greenhouse gas emissions that are inline with the level of decarbonization required to keep global temperature increase below 2°C compared topre-industrial temperatures.80
SECTOR refers to a segment of companies performing similar business activities in an economy. A sector
generally refers to a large segment of the economy or grouping of business types, while “industry” is used todescribe more specific groupings of companies within a sector.

A
Introduction
B
State of Climate-Related
Financial Disclosures

STRATEGY refers to an organization’s desired future state. An organization’s strategy establishes a foundation
against which it can monitor and measure its progress in reaching that desired state. Strategy formulation
generally involves establishing the purpose and scope of the organization’s activities and the nature of its
businesses, taking into account the risks and opportunities it faces and the environment in which it operates.

C
Adoption and Use of the
TCFD RecommendationsSUSTAINABILITY REPORT is a report that describes a company or organization’s impact on society, often
addressing environmental, social, and governance issues.

D
Disclosure of Strategy
Resilience Using Scenario
Analysis

Abbreviations

E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

2°C—2° Celsius

CEO—Chief Executive Officer

3°C—3° Celsius

CFO—Chief Financial Officer

4°C—4° Celsius

CISL—Cambridge Institute for Sustainable Leadership

A4S—Accounting for Sustainability

CRD—Corporate Reporting Dialogue

AI—Artificial Intelligence

CSR—Corporate Social Responsibility

ABA—American Bar Association

EBITDA—Earnings before Interest, Taxes, Depreciation, andAmortization

ABM—Asociación de Banco de México

EBRD—European Bank for Reconstruction andDevelopment

AUM—Assets under management

EFRAG—European Financial Reporting Advisory Group

CCS—Carbon Capture and Storage

EPRI—Electric Power Research Institute

CDSB—Climate Disclosure Standards Board

ESG—Environmental, Social, and GovernanceAppendices

79
80

IPCC, Climate Change 2014 Mitigation of Climate Change, Cambridge University Press, 2014.
Science-Based Targets Initiative, “What is a science-based target.”

The Task Force on Climate-related Financial Disclosures125Abbreviations continued

A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD

FCA— Financial Conduct Authority (United Kingdom)

METI—Ministry of Economy, Trade, and Industry (Japan)

FSB—Financial Stability Board

MOE—Ministry the Environment (Japan)

G20—Group of 20

NDC—Nationally-Determined Contributions

GDP—Gross Domestic Product

NFRD—Non-Financial Reporting Directive

GHG—Greenhouse Gas

NGFS— Network for Greening the Financial System

GICS—Global Industry Classification Standard

NGO—Non-governmental organization

GRI—Global Reporting Initiative

NPV—Net present value

IAIS—International Association of Insurance Supervisors

OECD—Organization for Economic Co-operation andDevelopment

ICAEW—Institute of Chartered Accountants in Englandand Wales

PACTA—Paris Agreement Capital Transition Assessment

ICMM—International Council for Mining and Metals

PRA—Prudential Regulation Authority (Bank of England)

IDB—Inter-American Development Bank

PRI—Principles for Responsible Investment

IEA—International Energy Agency

R&D—Research and Development

IGCC—Investor Group on Climate Change

RCP—Representative Concentration Pathways

IIGCC—Institutional Investors Group for Climate Change

SIF—Sustainable Insurance Forum

IIRC—International Integrated Reporting Council

TCFD—Task Force on Climate-related Financial Disclosures

IOSCO—International Organisation of Securities
Commissions

TEG—Technical Expert Group on Sustainable Finance(European Commission)

IPCC—Intergovernmental Panel on Climate Change

UN SDGs—United Nations Sustainable Development Goals

kg—Kilogram

UNEP FI—United Nations Environment Programme Financial
Initiative

JFSA—Japanese Financial Services Agency

WBCSD—World Business Council for Sustainable
Development

LNG—Liquefied Natural Gas

WEF—World Economic Forum

LPG—Liquefied Petroleum Gas

WEO—World Energy Outlook

MCA—Minerals Council of Australia

WWF—World Wildlife Fund

Appendices

The Task Force on Climate-related Financial Disclosures126Appendix 4: References
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A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

BHP. Climate Change: Portfolio Analysis Views. September 29, 2015. https://www.bhp.com//media/bhp/documents/investors/reports/2015/bhpbillitonclimatechangeporfolioanalysis2015.p
df.
BlueScope. 2017-2018 Sustainability Report. October 29, 2018. https://s3-ap-southeast2.amazonaws.com/bluescope-corporate-umbraco-media/media/2480/fy2018-bluescopesustainability-report.pdf.
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Cambridge Institute for Sustainability Leadership (CISL). Embedding environmental scenario analysis
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CISL. Embedding environmental scenario analysis into routine financial decision-making in South Africa.
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CISL. Physical risk framework: Understanding the impact of climate change on real estate lending andinvestment portfolios. February 22, 2019. https://www.cisl.cam.ac.uk/resources/sustainablefinance-publications/physical-risk-framework-understanding-the-impact-of-climate-change-onreal-estate-lending-and-investment-portfolios.
CISL. Sailing from different harbours. G20 approaches to implementing the recommendations of the Task
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CISL. “The ClimateWise Principles.” 2019.
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127

CISL. Transition risk framework: Managing the impacts of the low carbon transition on infrastructure
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Climate Action 100+. “Climate Action 100+.” 2019. http://www.climateaction100.org/.
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Climate Disclosure Standards Board (CSDB). CDSB Framework for Reporting Environmental Information,
Natural Capital and Associated Business Impacts. April 2018.
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CSDB. “TCFD Knowledge Hub.” 2019. https://www.tcfdhub.org/.
CDSB and Sustainable Accounting Standards Board. TCFD Implementation Guide. May 2019.
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Corporate Reporting Dialogue (CRD). “Corporate Reporting Dialogue: Better Alignment Project.”
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CPP Investment Board (CPPIB). Report on Sustainable Investing: Investing Responsibly for CPP
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Department for Work and Pensions (UK). Clarifying and strengthening trustees’ investment duties.
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Department of Finance (Canada). Investing in the Middle Class Budget 2019. March 19, 2019.
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Electric Power Research Institute. Grounding Decisions: A Scientific Foundation for Companies
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uct.
Electrolux AB. Electrolux Sustainability Report 2018. March 2019.
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Energie Baden-Württemberg (EnBW). Integrated Annual Report 2018. March 2019.
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Energias de Portugal (EDP). EDP Sustainability Report 2018. April 2019.
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018_en_0.pdf.
European Financial Reporting Advisory Group. “European Lab [Project Task Force] PTF on Climaterelated Reporting.” 2019. https://www.efrag.org/About/Governance/41/European-Lab-PTF-onClimate-related-Reporting?AspxAutoDetectCookieSupport=1.

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European Parliament and The Council of The European Union. Directive (EU) 2016/2341 of theEuropean Parliament and of the Council of 14 December 2016 on the activities and supervision of
institutions for occupational retirement provision (IORPs). December 23, 2016.
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Financial Conduct Authority (UK). Discussion Paper (DP18/8): Climate Change and Green Finance.
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Financial Reporting Council (UK). “Call for Participants in new Lab project: Climate and workforce
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Financial Stability Board (FSB). “FSB assesses implementation progress and effects of reforms.”
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FSB. “Press Release: FSB to establish Task Force on Climate-related Financial Disclosures.” December
4, 2015. https://www.fsb-tcfd.org/wp-content/uploads/2016/01/12-4-2015-Climate-change-taskforce-press-release.pdf.
FSB. “Press Release: Task Force report shows momentum building for climate-related financial
disclosures.” September 26, 2018. http://www.fsb.org/wp-content/uploads/R260918.pdf.
A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesFinancial Stability, Financial Services and Capital Markets Union. Technical Expert Group on
Sustainable Finance: report on climate-related disclosures. February 20, 2019.
https://ec.europa.eu/info/publications/190110-sustainable-finance-teg-report-climate-relateddisclosures_en.
G20. “Communiqué from the G20 Finance Ministers and Central Bank Governors Meeting inWashington, D.C. April 16-17, 2015.” April 2015.
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Goldstein, A., Turner, W., Gladstone, J., Hole, D. (2018). “The private sector’s climate change risk andadaptation blind spots.” Nature Climate Change, published online December 10, 2018.
Gold Fields Limited. Integrated Annual Report 2018. March 29, 2019.
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Gruppo Mondadori. 2018 Annual Report. March 2019.
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Hermes Investment Management. RI Transparency Report 2018. 2018.
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Hitachi, Ltd. Hitachi Integrated Report 2018. November 8, 2018. http://www.hitachi.com/IRe/library/integrated/2018/ar2018e.pdf.
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Institute for Climate Economics, Climate Brief No61: Very few companies make good use of scenarios toanticipate their climate-constrained future. February 2019. https://www.i4ce.org/download/veryfew-companies-make-good-use-of-scenarios-to-anticipate-their-climate-constrained-future/.
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IIGCC. Navigating climate scenario analysis – a guide for institutional investors. April 2, 2019.
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129Intergovernmental Panel on Climate Change (IPCC). “3.4.1.1 Decarbonization trends,” Climate
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International Airlines Group. Annual Report and Accounts 2018. March 5, 2019.
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A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
AnalysisInternational Association of Insurance Supervisors and the Sustainable Insurance Forum. Issues
Paper on Climate Change Risks to the Insurance Sector. July 2018.
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EUser Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures

Investor Leadership Network. “Climate Disclosures.” 2018.
https://www.investorleadershipnetwork.org/en/climate-disclosures/.

F
Initiatives Supporting
TCFD

Itaú Unibanco Holding S.A.. Consolidated Annual Report 2017. April 20, 2018.
https://www.itau.com.br/_arquivosestaticos/RI/pdf/en/Itau_RAC_2017_ing.pdf.

Appendices

IPIECA. “Reporting Survey Results 2018.” September 2018. http://www.ipieca.org/resources/goodpractice/reporting-survey-results-2018/.

JBS S.A.. Annual and Sustainability Report 2018. May 3, 2019.
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Lenovo Group Ltd. 2017/18 Sustainability Report. December 14, 2018.
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130London Stock Exchange Group. Revealing the full picture: Your guide to ESG reporting. January 2018.
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Nasdaq. ESG Reporting Guide. May 15, 2019. https://business.nasdaq.com/esg-guide/.
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A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

New York State Common Retirement Fund. 2018 Comprehensive Annual Financial Report. October 31,
2018.
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Oil Search. Annual Report 2018. March 28, 2019.
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One Planet Summit: A Platform of Commitments to Meet the Challenge of Climate Change. “The One
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Organisation for Economic Co-operation and Development. G20/OECD Principles of Corporate
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F1.
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PRI. Annual Report 2018. August 14, 2018.
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Prudential Regulation Authority (PRA) (UK). Consultation Paper | 23/18: Enhancing banks’ and insurers’
approaches to managing the financial risks from climate change. October 2018.
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Repsol Group. 2018 Annual Corporate Governance Report. February 28, 2019.
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A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Repsol Group. 2018 Integrated Management Report. February 28, 2019.
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Repsol Group. Walking the talk on energy transition. November 2018.
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Rio Tinto. Our Approach to Climate Change. February 27, 2019.
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Royal DSM. “Advocating climate change.” 2019.
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Royal DSM. “DSM sets science-based reduction targets for emissions.” March 13, 2019.
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Royal DSM. “DSM Strategy Update.” June 20, 2018.
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Royal DSM. “Enabling the low-carbon economy.” 2019.
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Royal DSM. Royal DSM Integrated Annual Report 2018. March 2019.
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Royal Dutch Shell. 2018 Annual Report and Form 20-F. March 14, 2019.
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Royal Dutch Shell. Sustainability Report 2017. April 2018. https://reports.shell.com/sustainabilityreport/2017/.
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A
Introduction

SAP. “Connectivity of Financial and Non-Financial Indicators.” https://www.sap.com/integratedreports/2018/en/connectivity.html.

B
State of Climate-Related
Financial Disclosures

SAP. “Interactive Chart Generator.” https://www.sap.com/integrated-reports/2018/en/interactive-chartgenerator.environment.greenhouse-gas-emissions.html.

C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

Science-Based Targets Initiative. “What is a science-based target?”https://sciencebasedtargets.org/what-is-a-science-based-target/.
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UNEP FI. Navigating a New Climate: Assessing credit risk and opportunity in a changing climate (Part 2:
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A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
Appendices

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ds.pdf.
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https://ghgprotocol.org/corporate-standard.

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A
Introduction
B
State of Climate-Related
Financial Disclosures
C
Adoption and Use of the
TCFD Recommendations
D
Disclosure of Strategy
Resilience Using Scenario
Analysis
E
User Perspectives on
Decision-Useful ClimateRelated Financial
Disclosures
F
Initiatives Supporting
TCFD
AppendicesNothing in this document constitutes an offer or a solicitation of an offer to buy or sell a security or financial
instrument or investment advice or recommendation of a security or financial instrument. The Task Forceon Climate-related Financial Disclosures believes the information herein was obtained from reliable sources,
but does not guarantee its accuracy. Copyright 2019 The Task Force on Climate-related Financial
Disclosures.

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