TCFD WORKSHOP
Session 2 – GovernanceFebruary 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 Governance recommendation

10

Q&A

20

Introduction

4

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

Governance

Strategy
RiskManagement

Metricsand 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, 2017

5Introduction to the Governance Recommendation (continued)

The Task Force’s Governance recommendation is supported by two 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 Governance Recommendation (continued)
Various TCFD publications offer guidance on the Governance recommendation
FinalRecommendations
and RecommendedDisclosures

Provides details on the following:

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

Publication includes guidance on
Governance recommendation• The Task Force’s remit from the Financial Stability Board• TCFD general framework, including recommendations
and recommended disclosures
2017 ReportImplementation
Guidance

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 Integrationand Disclosure

2020 Guidance on
Scenario Analysis for NonFinancial Companies

2021 Guidance onMetrics, Targets, andTransition Plans

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

7Disclosure Varies Across Recommendations

The Task Force recommends all companies disclose governance of climate-related issues. Despite
this, the Governance recommended disclosures had nearly the lowest level of disclosure
TCFD-Aligned Disclosure by Year, for Each Recommended Disclosure
FY 2018

Recommendation
Governance

Strategy

Risk Management

Recommended Disclosurea) Board Oversight16b) Management's Role9a) Climate-Related Risks andOpportunities

14b) Impact on Company

13c) Resilience of Strategy

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

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

9%

9%

13%

25%

11%

18%
38%
26%

5%

7%

14%
10%

30%

42%

52%

39%

13%
16%

1520%

30%

17%

29%

17%

27%
34%

1027%

1013

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

1417FY 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 Governance Recommendation

Disclosing governance practices provides important context for investors and other users ofdisclosure
Investors and other users of climate-related financial disclosures are interested in understanding the role acompany’s board plays in overseeing climate-related issues as well as management’s role in assessing andmanaging those issues. Such information supports evaluations of whether climate-related issues receive
appropriate board and management attention.
In addition, as part of the lessons learned from the financial crisis of 2007-2008, investors and others have placedheightened attention on governance and risk management practices given their importance in a company
achieving its strategy and business objectives.
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 thefollowing types of governance information as the most useful:•How the board considers climate-related issues when overseeing major
capital expenditures, acquisitions, and divestitures•How the board considers climate-related issues when reviewing andguiding strategy•

Description of management’s role in assessing and managing climaterelated issues

Decision Useful Climate-Related Information
For its 2020 status report, the Task Force
conducted a survey to identify specific climaterelated information users find the most usefulwhen making financial decisions. The Task Force
asked users to rate the usefulness of specific anddiscrete types of information—drawn from theguidance for all sectors—for its 11 recommendeddisclosures.

SourcesOECD, Risk Management and Corporate Governance, 2014
TCFD, 2020 Status Report, 2020

9Overview of the Governancerecommendation

10Structure of the Governance Recommendation Overview Section

The overview of each of the two recommended disclosures under the Governance 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 Governance a)

The first recommended disclosure under the Governance recommendation — Governance a) —asks companies to describe the board’s oversight of climate-related risks and opportunities
Governance

Disclose the company’s governance around climate-related risks and opportunities
All Sectors
RecommendedDisclosure a)
Describe the board’s
oversight of climaterelated risks andopportunities.

In describing the board’s oversight of climate-related issues, companies should consider including a discussion of thefollowing: processes and frequency by which the board and/or board committees (e.g., audit, risk, or other committees) are
informed about climate-related issues; whether the board and/or board committees consider climate-related issues when reviewing and guiding strategy,
major plans of action, risk management policies, annual budgets, and business plans as well as setting thecompany’s performance objectives, monitoring implementation and performance, and overseeing major capital
expenditures, acquisitions, and divestitures; and how the board monitors and oversees progress against goals and targets for addressing climate-related issues.

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

12

Example of Disclosure for Governance a)

Describe the board’s oversight of climate-related risks and opportunities
Example Disclosure: National Grid (Energy)
TCFD alignment: this example describes
an energy company's board oversight ofclimate-related issues. The company
indicates its Board of Directors is
responsible for overseeing climaterelated risks and opportunities anddescribes the board's approval ofclimate change as a principal risk as partof the annual risk review. The example
also describes the roles of board subcommittees, including the SEH
Committee's consideration of climaterelated risks and opportunities whenreviewing business strategy. The report
also shares the frequency with whichsome of these governing bodies meet(e.g., the Board of Directors meetquarterly to review the company's
environmental sustainability metrics
and targets performance).

Source: National Grid, Annual Report and Accounts 2020/21, 2021, p.61.
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

Governance b)

Governance b) asks companies to describe management’s role in assessing and managing climaterelated risks and opportunities
Governance

Disclose the company’s governance around climate-related risks and opportunities
All Sectors
Recommended
In describing management’s role related to the assessment and management of climate-related issues, companies
Disclosure b)
should consider including the following information:
Describemanagement’s role in  whether the company has assigned climate-related responsibilities to management-level positions or committees;
assessing andand, if so, whether such management positions or committees report to the board or a committee of the board andmanaging climatewhether those responsibilities include assessing and/or managing climate-related issues;
related risks andopportunities.
 a description of the associated organizational structure(s); processes by which management is informed about climate-related issues; and how management (through specific positions and/or management committees) monitors climate-related issues.

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

14

Governance a) and b): Clarification on Disclosure
In its 2019 status report, the TCFD shared the results of a comprehensive survey on theadoption 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 Governance recommendation, nearly 50% of the companies indicated disclosing
governance practices around climate-related issues was challenging because their governancepractices apply to all issues, not just climate.
Companies did not want to disclose their governance around climate-related issues separatelyfrom their disclosure of their general governance practices, which apply to all types of issues.
To address this concern, the Task Force clarified that it did not intend for companies withcomprehensive governance processes that address climate-related issues to create separate
processes or duplicate existing disclosures. If a company’s disclosures clearly describe its
governance processes and it is clear those processes cover climate-related issues, then no
further disclosure may be needed.

Sources
TCFD, 2019 Status Report, 2019
TCFD, 2020 Status Report, 202015Example of Disclosure for Governance b)

Describe management’s role in assessing and managing climate-related risks and opportunities
Example Disclosure: Allianz Group(Insurance Underwriting and Investing)
TCFD alignment: this example describes
management’s responsibilities for climaterelated issues at Allianz Group.
• The company indicates that Global
Sustainability is responsible for coordinating
integration of climate into insurance andinvestment activities and that ESG Task
Forces were created to support crossfunctional collaboration in implementing
efforts for integration. The ESG Task Forces
are sponsored by senior executives, asshown in the table on the right.
• The company indicates its insurance andinvestment functions have well-establishedclimate teams that report to Board ofManagement level. In addition, theInvestment Management Board oversees
climate strategy for the investment
management function, including decisions
on implementation, target-setting, andcompliance related to portfolio
decarbonization targets.

[…]

Source: Allianz Group, Allianz Group Sustainability Report 2020, 2020, p. 82
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

Discussion questions• Does your company already have governanceprocesses and bodies in place that explicitly
address climate-related issues?
• Are the responsibilities of the board andmanagement clearly defined?

17Additional Resources

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

Knowledge Hub

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

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

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

https://www.tcfdhub.org/

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TCFD Series of Workshops

The next session will focus on the Strategy 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

19Q&A20