TCFD WORKSHOP
Session 4 – Risk Management

February 2022

TCFD Series of Workshops
Session1

Fundamentals and Overview of TCFD

2

TCFD Recommendation:
Governance3

TCFD Recommendation:
Strategy

4

TCFD Recommendation:
Risk Management

5

TCFD Recommendation:
Metrics & Targets

This session

2

Contents
Introduction

4

Overview of the Risk Management recommendation

10

Overview of integrating climate-related risks into existing processes

22

Q&A

30

Appendix: Supplemental risk management guidance for thefinancial sector*

31* There is no supplemental guidance on risk management for non-financial companies

Introduction

4

Introduction to the Risk Management Recommendation
In this session, we will discuss the Risk Management recommendation
Core Elements of the TCFD Recommendations
Governance

Governance

Strategy
RiskManagement

Metrics
and Targets

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

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

Introduction to the Risk Management Recommendation (continued)
The Task Force’s Risk Management recommendation is supported by three recommended
disclosures

Governance

Strategy

Risk Management

Metrics and Targets

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

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

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

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

Recommended Disclosures

Recommended Disclosures

Recommended Disclosures

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

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

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

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

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

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

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

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

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

climate-related risks andopportunities.

assessing and managing climaterelated risks and opportunities.

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

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

Provides details on the following:

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

Publication includes guidance on
Risk Management recommendation• The Task Force’s remit from the Financial Stability Board
2017 Report

Implementation
Guidance• TCFD general framework, including recommendations
and recommended disclosures
Provides guidance on the application of the recommendations
as well as implementation guidance for the following:• All sectors• Four financial industries

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

Additional
Supporting Materials

2017 Scenario Analysis
Technical Supplement

2020 Guidance on Risk
Management Integration
and Disclosure

2020 Guidance on
Scenario Analysis for NonFinancial Companies

2021 Guidance on
Metrics, Targets, andTransition Plans

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

7

Disclosure Varies Across Recommendations

Disclosure of the three Risk Management recommended disclosures grew significantly between
2018 and 2020, but still lags most Strategy and all Metrics and Targets recommended disclosures
TCFD-Aligned Disclosure by Year, for Each Recommended Disclosure
Recommendation
Governance

Strategy

Risk Management

Recommended Disclosurea) Board Oversight16b) Management's Role

9a) Climate-Related Risks andOpportunities

14b) Impact on company

13c) Resilience of Strategy

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

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

FY 2018

9%

9%

13%

25%

11%

18%
38%
26%

5%

7%

14%
10%

30%

42%

52%

39%

13%
16%

15

20%

30%

17%

29%

17%

27%
34%

10
27%

10
13

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

14

17

FY 2019

21%

24%

31%

40%

44%

37%
34%

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

8

Importance of the Risk Management Recommendation

Disclosing risk management processes provides important context for investors and other users of
disclosure
Investors and other users of climate-related financial disclosures are interested in understanding how acompany’s climate-related risks are identified, assessed, and managed and whether those processes areintegrated into existing risk management processes. Such information supports users of climate-related
financial disclosures in evaluating the company’s overall risk profile and risk management activities.
Providing Decision Useful Information to Investors and Other Users

Based on a survey to understand the most useful climate-related information
for making financial decisions, users identified the following types of risk
management information as the most useful:• Description of whether the company considers existing and emerging regulatory
requirements related to climate change (e.g., limits on emissions) as part of its risk
assessment processes• The company's processes for identifying and assessing climate-related risks• The company's processes for prioritizing climate-related risks, including how materiality
determinations are made• The company's processes for managing climate-related risks, including how it makes decisions
to mitigate, transfer, accept, or control those risks• How the company's processes for identifying, assessing, and managing climate-related risks areintegrated into the company’s overall risk management
1. This term refers to investors, lenders, insurance underwriters, and other users of climate-related financial disclosures
Sources
TCFD, Guidance on Risk Management Integration and Disclosure, 2020
TCFD, 2020 Status Report, 2020

Decision Useful ClimateRelated Information
For its 2020 status report, theTask Force conducted a survey toidentify specific climate-related
information users find the mostuseful when making financial
decisions. The Task Force asked
users to rate the usefulness of
specific and discrete types of
information—drawn from theguidance for all sectors—for its
11 recommended disclosures.

9Overview of the Risk Management
recommendation

10Structure of the Risk Management Recommendation Overview
SectionThe overview of each of the three recommended disclosures under the Risk Management
recommendation will follow the structure provided belowi.

Describing the guidance for all sectors
associated with the recommended disclosure

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

11

Recommended Disclosure Risk Management a)

The first recommended disclosure under the Risk Management recommendation — Risk
Management a) — asks companies to disclose their processes for identifying and assessing climaterelated risks
Risk Management

Disclose how the company identifies, assesses, and manages climate-related risks
All Sectors
Recommended
Disclosure a)
Describe thecompany’s processes
for identifying andassessing climaterelated risks.

Companies should describe their risk management processes for identifying and assessing climate-related risks. An
important aspect of this description is how companies determine the relative significance of climate-related risks inrelation to other risks.
Companies should describe whether they consider existing and emerging regulatory requirements related to climatechange (e.g., limits on emissions) as well as other relevant factors considered.
Companies should also consider disclosing the following: processes for assessing the potential size and scope of identified climate-related risks and definitions of risk terminology used or references to existing risk classification frameworks used.

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

12

Example of Disclosure for Risk Management a)

Describe the company’s processes for identifying and assessing climate-related risks
Example Disclosure: Schlumberger Limited (Energy)
TCFD alignment: the following
example describes an energy
company’s processes for
identifying and assessing climaterelated risks. The report describes
how business risks related toclimate change are identified, at a
corporate level, based on input
from a variety of internal andexternal sources, including
through local risk assessment,
country-specific climate
assessments in line with TCFD,
customers, the Board, investors,
and other stakeholder feedback.
The report also provides casestudies on how the company
applies learnings from its risk
assessments.

Risk Management

The climate-related risks we routinely monitor as part of this process

The company’s risk identification is performed annuallyat two levels. The ERC performs a corporate-level risk

include loss of containment and well control, country-specific legislation
and regulations, environmental compliance, financial risk associated withmapping exercise, which involves the CEO and several
other members of senior management, and while
maintaining oversight, delegates operational (field-level)risk assessment and management to the company’svarious geographies, businesses, and functions. To theextent that the ERC identifies recurring themes from theoperational risk mapping exercises, they are acted on at
the corporate level. Members of the ERC meet formallyat least once a year, and more frequently on an ad hoc
basis, to define and improve the risk mapping process,and to review and monitor the results of those exercises
and those that have been delegated.
We believe that our comprehensive risk assessment
program is reasonably designed to identify and manage
climate change-related enterprise-wide risks that havethe potential to significantly affect our businesses overthe short, medium, and longer terms. Our risk
assessments cover exposures to both physical andtransition climate-related risks and their respective
financial impact.

climate change, perception of industry due to climate change dialogue, andextreme weather. At a corporate level, business risks related to climatechange are identified based on input from a variety of internal and externalsources (e.g., local risk assessment, country-specific climate assessments
in line with TCFD, customers, the Board, investors, and other stakeholder
feedback). A corporate risk map is developed and reviewed with the CEO
and his leadership team. Climate change and energy transition are twoenterprise- level risks. Enterprise-level risks are developed into various
scenarios, guided by subject matter experts, and these scenarios aremodeled to assess potential financial impacts. Results of any financial
stress tests are discussed with our banks to assess liquidity needs over athree-year time span, along with probable effects on credit ratings andoptions to deal with each scenario. In the case of acute physical risk, crisis
management scenarios are created and tested in desktop exercises at the
local and corporate level by the respective management. At the asset level,risks are included in the operational risk maps, which help to identify andassess potential threats to the mid- to long-term strategic objectives of thevarious business units. These risks are monitored and embedded into thebusiness planning cycle. Risks are scored on likelihood, severity, time
horizon, and financial impact. Where applicable, management objectives
are set to reflect completion of mitigation plans.

Source: Schlumberger Limited, 2020 Sustainability Report, pp. 20-21
Note: Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure.
They may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of
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.

13

Example of Disclosure for Risk Management a) (continued)
Describe the company’s processes for identifying and assessing climate-related risks
Example Disclosure: Schlumberger Limited (Energy)
TCFD alignment: the following
example describes an energy
company’s processes for
identifying and assessing climaterelated risks. The report describes
how business risks related toclimate change are identified, at a
corporate level, based on input
from a variety of internal andexternal sources, including
through local risk assessment,
country-specific climate
assessments in line with TCFD,
customers, the Board, investors,
and other stakeholder feedback.
The report also provides casestudies on how the company
applies learnings from its risk
assessments.

Climate Risk Assessments
Country-level climate risk assessments provide a practical way to understand climate-related risks and common issues across theorganization. For these, we work with a leading sustainability consultant to review the impact of climate issues on our direct operations.
Climate-related risks (physical and financial, including transition risks) are assessed using scenario-based analysis.
While there are country-specific concerns, some commonalities across geographies are acute physical risks associated with extreme
weather (e.g., storm surges, droughts, heat waves, flooding, rain, snow); chronic physical risks such as the potential impact of sea-level
rise on our global footprint, water availability, and protected marine life; and transition risks such as policy and legal risks, the impact ofa carbon tax on Schlumberger and our customers, the cost of electrifying our operations, and adapting our technology portfolio tochanging customer preference. We have completed 75% of the work on our planned country-level climate risk assessments.
The following case studies are examples of how we apply the learnings from these assessments:•

Chronic Physical Risk Case Study: One country assessment indicated that 62% of our locations in that country could be exposed tocoastal flooding due to sea-level rise by 2050. To address this risk, a decision was made—supported by the Board and
Schlumberger leadership—to perform a scenario-based assessment across the entirety of the company for all locations potentiallyat risk of coastal flooding. This was completed in 2020 and mitigation plans were developed for all locations identified as having a
potential future risk of coastal flooding (e.g., reviewing flood insurance and lease agreements), which constituted less than 1% of
our global facility footprint.

Source: Schlumberger Limited, 2020 Sustainability Report, pp. 20-21
Note: Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure.
They may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of
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.

14

Risk Management b)

Risk Management b) asks companies to disclose their processes for managing climate-related risks
Risk Management

Disclose how the company identifies, assesses, and manages climate-related risks
All Sectors
Recommended
Disclosure b)
Describe thecompany’s processes
for managing
climate-related risks.

Companies should describe their processes for managing climate-related risks, including how they make decisions to
mitigate, transfer, accept, or control those risks.
In addition, companies should describe their processes for prioritizing climate-related risks, including how materiality
determinations are made within their companies.
In describing their processes for managing climate-related risks, companies should address the risks included in Tables
A1.1 and A1.2 (pp. 75–76) of the Guidance, as appropriate.

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

15

Example of Disclosure for Risk Management b)
Describe the company’s processes for managing climate-related risks
Example Disclosure: Cemex (Materials and Buildings)
TCFD alignment: the following example
describes Cemex’s processes for
identifying, assessing, mitigating, andmonitoring risks, which include climaterelated risks. The inclusion of climaterelated risks is made clear through amapping of TCFD recommended
disclosures to specific pages in the report.
The company's approach to managing
risks are described under “Risk
Mitigation,” and on p. 89, the report
describes how Cemex mitigates specificclimate-related risks (one example
included below).
CEMEX Mitigation Actions:» CEMEX has set and publicly announced its 2030

reduction target for which it developed a CO2 Roadmap
including specific reduction initiatives for each cementsite and identifying the resources (CAPEX) and calendar
for their implementation. Both the target and roadmap
have been verified by Carbon Trust, ensuring technicalfeasibility of the considered technologies as well as
adequate governance and a robust strategy to reduce
emissions. Each region monitors on a monthly basis its
site-by-site plan to ensure its implementation andresources allocation

Source: Cemex, 2020 Integrated Report, pp. 87 and 89
Note: Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure. They
may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

16

Risk Management c)

Risk Management c) asks companies to disclose how processes for identifying, assessing, andmanaging climate-related risks are integrated into their overall risk management.
Risk Management

Disclose how the company identifies, assesses, and manages climate-related risks
All Sectors
Recommended
Disclosure c)
Describe how
processes for
identifying, assessing,and managing
climate-related risks
are integrated into
the company’s
overall risk
management.

Companies should describe how their processes for identifying, assessing, and managing climate-related risks areintegrated into their overall risk management.

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

17

Risk Management c): Clarification on Disclosure
In its 2019 status report, the TCFD shared the results of a comprehensive survey on the
adoption and use of the TCFD recommendations. Part of the survey asked companies that had
implemented or were implementing the TCFD recommendations to describe issues theyencountered as part of their implementation.
For the Risk Management recommendation, nearly 50% of the companies indicated disclosing
risk management processes around climate-related issues was challenging because theirprocesses apply to all issues, not just climate.
Companies did not want to disclose their risk management processes around climate-related
issues separately from their disclosure of their general risk management processes, which
apply to all types of issues.
To address this concern, the Task Force clarified that it did not intend for companies withcomprehensive risk management processes that address climate-related issues to create
separate processes or duplicate existing disclosures. If a company’s disclosures clearly
describe its risk management processes and it is clear those processes cover climate-related
issues, then no further disclosure may be needed.
In addition, companies have asked how explicit they should be on whether climate is integrated into existingprocesses or if it is a separate process. The following slides will provide an illustrative example.
Sources
TCFD, 2019 Status Report, 2019
TCFD, 2020 Status Report, 202018

Example of Disclosure for Risk Management c)

Describe how processes for identifying, assessing, and managing climate-related risks are integrated
into the company’s overall risk management
Example Disclosure: ANZ Banking Group Ltd (Banking)
TCFD alignment: the following
example describes how climaterelated risks fit into Australia
and New Zealand (ANZ) Banking
Group Limited’s overall risk
management framework andhow these risks are included in
the Group and Institutional Risk
Appetite Statements to ensure
they are appropriately
identified and assessed.

Source: Australia and New Zealand Banking Group Limited, 2019 Climate-Related Financial Disclosures, 2019, p. 5
Note: Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure. They
may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

19

Example of Disclosure for Risk Management c) (continued)

How explicit should disclosures be on whether climate is integrated into existing processes or if it isa separate process
Example Disclosure: Société Générale Group (Banking)
TCFD alignment: the following
example describes Société
Générale Group’s use of the
TCFD definitions for climaterelated transition and physicalrisks, explains how climaterelated risks are a driver ofexisting risks, and then indicatesthe “existing risk management
governance framework andprocesses have simply been
updated to include climate risk
factors.”

Source: Société Générale Group, Universal Registration Document 2020, 2020, p. 284
Note: Some content was reformatted in order to fit the page; and some content has been removed, denoted by […].
The examples included are not intended to represent “best practice” nor demonstrate disclosures that fully meet the associated recommended disclosure.
They may not be applicable to all sectors and should be considered within the framework of the sector in which the company operates. The mention of specificcompanies does not imply that they are endorsed by the TCFD or its members in preference to others of a similar nature that are not mentioned.

20

Discussion question• Which information from the Risk
Management recommended disclosures doyou believe is the most difficult to disclose,
and why?

21

Overview of integrating climaterelated risks into existing processes

22Background

The Task Force developed Risk Management Integration and Disclosure guidance to address specificissues identified by preparers in implementing its Risk Management recommendation
Task Force published fourrecommendations in 2017, with
one on Risk Management
For risk management, the Task Forcerecommends companies disclose
how they identify, assess, andmanage climate-related risks. The
recommendation is accompanied bythree recommended disclosures, as
shown below.
Recommended Disclosuresa) Describe the company’s processes for
identifying and assessing climaterelated risks.
b) Describe the company’s processes for
managing climate-related risks.
c) Describe how processes for identifying,assessing, and managing climaterelated risks are integrated into thecompany’s overall risk management.

Task Force conductedsurvey in late 2018
As part of its 2019 status report, theTask Force conducted a survey tobetter understand companies’
efforts to implement the TCFD
recommendations and associatedchallenges and found the following:• 75% of companies surveyed
indicated the Risk Management
recommendation is difficult toimplement and• several of these companies
indicated they do not haveprocesses for identifying,assessing, or managing climaterelated risks.

Task Force developed
risk management
guidance in 2020
The Task Force developed guidance on
Risk Management Integration andDisclosure to help address some of theissues companies identified.
The guidance is aimed at companies
that are interested in integratingclimate-related risks into their existingrisk management processes
and disclosing information on theirrisk management processes inalignment with the TCFD
recommendations.

2323

Unique Characteristics of Climate-Related Risks

At the heart of integrating climate-related risks into existing risk management processes is a solid
understanding of the unique characteristics of these risks
Possible implications of temperature increases• To understand the unique characteristics of climate-relatedrisks, it is important to understand possible implications ofclimate change.
• Possible implications of continued warming of the Earthare wide ranging, affecting infrastructure, energy, food,water supplies, etc.
• For companies, this means climate change can affect theirfacilities and operations, supply and distribution chains,
employees, and customers.
Unique Characteristics
The unique characteristics of climate-related risks are summarized here — understanding these is critical tounderstanding how climate-related risks may affect a company.
1.

Different effects based on geography and activities

4.

Changing magnitude and non-linear dynamics

2.

Longer time horizons and long-lived effects

5.

Complex relationships and systemic effects

3.

Novel and uncertain nature

Source: TCFD, Guidance on Risk Management Integration and Disclosure, 202024

Key Principles for Integration

The TCFD guidance on risk management includes specific, key principles to help companies achieveeffective integration of climate-related risks into existing risk management processes
Interconnections. Integrating climate-related risks into existing risk management requires
analysis and collaboration across the company. The principle of interconnections means all
relevant functions, departments, and experts are involved in the integration of climate-relatedrisks into the company’s risk management processes and ongoing management of such risks.
Temporal Orientation. Climate-related physical and transition risks should be analyzed acrossshort-, medium-, and long-term time frames for operational and strategic planning, which may
require extending beyond traditional planning horizons.
Proportionality. The integration of climate-related risks into existing risk management
processes should be proportionate in the context of the company’s other risks, the materialityof its exposure to climate-related risks, and the implications for the company’s strategy.
Consistency. The methodology used to integrate climate-related risks should be usedconsistently within a company’s risk management processes to support clarity on analysis ofdevelopments and drivers of change over time.

Source: TCFD, Guidance on Risk Management Integration and Disclosure, 202025

Initial Steps for Integration

The Task Force provides the following steps to help kick-start the process of integrating climaterelated risks into existing processes

1

Understand Climate Change Concepts

2

Ensure there is a general understanding across thecompany of climate change concepts and its potential
impacts. This will enable management and others
involved in managing risk to connect the general effects
of climate change to more specific implications for thecompany.
3

Update Risk Taxonomy

Identify the specific risk management processes andelements that may need to be adjusted for the
integration of climate-related risk as well as thefunctions and departments responsible for those
processes and elements.
4

Incorporate climate-related risks into the existing risktaxonomy and risk inventory used in the company. This
includes mapping climate-related risks to existing risk
categories and types.

5

Identify Processes and Functions

Adjust Risk Management Elements

Adapt existing risk management processes andassociated elements based on knowledge gained
through the previous steps and on the uniquecharacteristics of climate-related risks.

Disclose Risk Management Processes

The Task Force views these initial steps as iterative rather than strictly sequential
Source: TCFD, Guidance on Risk Management Integration and Disclosure, 202026

Discussion question• Are climate-related risks managed
using the same processes used forother types of risks in yourcompany?

27

Additional Resources

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

Knowledge Hub• Find all the information you need about the TCFD
on its official website, including therecommendations and all other publications.

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

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

https://www.tcfdhub.org/

28

TCFD Series of Workshops

The next session will focus on the Metrics and Targets recommendation
Session1

Fundamentals and Overview of TCFD

2

TCFD Recommendation:
Governance3

TCFD Recommendation:
Strategy

4

TCFD Recommendation:
Risk Management

5

TCFD Recommendation:
Metrics & Targets

Next session

29

Q&A

30

Appendix: Supplemental risk
management guidance for thefinancial sector

31

Overview of the Supplemental Guidance

The Task Force identified certain areas where supplemental guidance was warranted for thefinancial sector, specifically for the Risk Management recommendation
Financial Sector
The supplemental guidance is intended to provide additional context for the financial sector when preparing
disclosures consistent with the Task Force’s recommendations, namely for the following four major industries:– Banks– Insurance Companies– Asset Owners– Asset Managers

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

32

Supplemental Risk Management Guidance for the Financial
SectorRisk Management

Disclose how the company identifies, assesses, and manages climate-related risks
Banks
Recommended disclosure a)Banks should consider characterizing their climate-related risks in the context of traditional banking industry
risk categories such as credit risk, market risk, liquidity risk, and operational risk.
Banks should also consider describing any risk classification frameworks used (e.g., the Enhanced Disclosure
Task Force’s framework for defining “Top and Emerging Risks”).

Insurance Companies
Recommended disclosure a)

Insurance companies should describe the processes for identifying and assessing climate-related risks on re/insurance portfolios by geography, business division, or product segments, including the following risks: physical risks from changing frequencies and intensities of weather-related perils;
 transition risks resulting from a reduction in insurable interest due to a decline in value, changing energy
costs, or implementation of carbon regulation; and liability risks that could intensify due to a possible increase in litigation.

Recommended disclosure b)

Insurance companies should describe key tools or instruments, such as risk models, used to manage climaterelated risks in relation to product development and pricing.
Insurance companies should also describe the range of climate-related events considered and how the risks
generated by the rising propensity and severity of such events are managed.

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

33

Supplemental Risk Management Guidance for the Financial
Sector (continued)
Risk Management

Disclose how the company identifies, assesses, and manages climate-related risks
Asset Owners
Recommended disclosure a)

Asset owners should describe, where appropriate, engagement activity with investee companies to encourage
better disclosure and practices related to climate-related risks to improve data availability and asset owners’ability to assess climate-related risks.

Recommended disclosure b)

Asset owners should describe how they consider the positioning of their total portfolio with respect to thetransition to a low-carbon energy supply, production, and use. This could include explaining how asset owners
actively manage their portfolios’ positioning in relation to this transition.

Asset Managers
Recommended disclosure a)

Asset managers should describe, where appropriate, engagement activity with investee companies toencourage better disclosure and practices related to climate-related risks in order to improve data availability
and asset managers’ ability to assess climate-related risks.
Asset managers should also describe how they identify and assess material climate-related risks for eachproduct or investment strategy. This might include a description of the resources and tools used in the process.

Recommended disclosure b)

Asset managers should describe how they manage material climate-related risks for each product orinvestment strategy.

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

34