FORWARD-LOOKING FINANCIAL
METRICS CONSULTATION
Summary of responses

March 2021

Forward-looking financial metrics | Introduction

Background and scope of consultation• The Task Force’s recommendations and supplemental guidance published in 2017 encouraged asset managers
and asset owners to disclose to their clients and beneficiaries the metrics they use to assess climate-related risks
and opportunities as well as other metrics they believe are useful for decision making• Disclosure practices and the use of disclosures by financial market participants have continued to evolve since2017 through development of new research, tools, and resources as well as in response to a growing frequencyof physical climate-related impacts• Additionally, 120 countries plus the European Union have announced that they are working towards achieving
net-zero greenhouse gas (GHG) emissions by 2050—an indication of potential shifts in business models andcapital flows that the financial sector seeks to understand• In this context, the Task Force on Climate-related Financial Disclosures (Task Force or TCFD) conducted a public
consultation from October 29, 2020–January 28, 2021 to gather feedback on potential forward-looking metrics forfinancial firms– The Task Force solicited views on decision-useful, forward-looking metrics to be disclosed by financial
institutions, both requesting feedback on a specific set of metrics that have gained interest from the financial
sector in recent years and on the usefulness of forward-looking financial metrics more broadly– Invitations to respond to the survey were sent to TCFD supporters, representatives of NGOs, and businessassociation partners as well as shared through TCFD’s social media pages.
– A total of 209 respondents completed the consultation survey as of January 28. These slides summarize key
findings from the consultation survey. Findings focus on the relevant subset of respondents for each question– In addition, several firms/organizations submitted response letters, which will be considered when drafting
additional guidance2Forward-looking financial metrics | Introduction

Overview of respondents

Roughly half of respondents were financial services firms. A quarter of respondents hold roles focused onsustainability, while a fifth are involved in investment and asset management. Half of respondents were fromorganizations headquartered in EMEA, with most of the remaining from the AMER and APAC regions
Organization type46%

Location of headquarters

Role/position

Sustainability

Financial services

10%

9%

8%

6%

6%

11%

Investment/
asset mgmt

Non-financialcompany
Industry/
Trade association
Academia/Education/
Research

23%

AMER
26%

Academic/industry
expert

EMEA
53%

LATAM
3%

NGO

Data/Methodology
ProviderOther

Q1: Where is your organization headquartered?
Q2: What is your role/position? Please select ONE only.
Q3: Which one of the following best describes your organization? Please select ONE only.
Base: Respondents (n = 209)

18%

APAC
18%

11%

Finance

9%

Government/regulatory affairs

6%

Board member

4%

Corporate reporting

4%

Risk

4%

Other

12%

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Forward-looking financial metrics | Introduction

Key takeaways from the consultation

Use and disclosure of forward-looking financial metrics• Three-quarters of respondents report using some form of “forward-looking metrics,” a category that includes not only theuniverse of metrics specifically considered in the consultation—for example, implied temperature rise, climate value-at-risk,and portfolio alignment estimates— but also a broader range of metrics that include measures of emissions, carbon
intensity, environmental resources, and screening criteria• This broad set of metrics support many uses including risk management, portfolio allocation, and communication andengagement. Roughly half to three-quarters of respondents at financial firms report using at least one of these metrics, withasset managers reporting the highest use• Fewer report using the metrics described in the consultation. When used, these metrics are more likely to be used
for monitoring than to support financial decision-making. Only a tenth of those that use these metrics currently disclose
them, though an additional third plan to do so in the future
Methodology considerations• Respondents agree there are challenges using and disclosing the metrics described in the consultation, with roughly threequarters particularly concerned with reliance on assumptions to derive future emissions, future uncertainty, and opaque ordifficult methodologies• Despite the challenges raised, respondents agree that the consultation metrics could be useful with improvements
to methodology, with roughly three-quarters point to the need for more transparency, comparability, and standardization
across methodologies as well as improved emissions data
• Almost all would like the methodology for forward-looking metrics to cover Scope 1 and 2 emissions, with many interested in
Scope 3 as well

The Task Force will consider these findings in its planned 2021 work on Metrics and Targets
and will release broader, additional draft guidance for further market review

4Forward-looking financial metrics | Introduction

Three quarters of respondents report using some form of”forward-looking metrics” but they define such metrics broadly
Universe of forward-looking metrics discussed by respondents

Report using forward-looking
metrics, broadly defined

Forward-looking metrics laid out in the consultation document• Implied temperature rise or warming potential• Climate value-at-risk• A forward-looking estimate of the amount or percentage of carbon-related assets in eachportfolio over the course of their planning horizon• Unpriced carbon cost
• Carbon earnings at-risk• Amount of apportioned emissions over/under a 1.5°C alignment trajectory

Currently use

78%

Do not use

22%• The proportion of underlying investments that are aligned with the EU Taxonomy
Additional forward-looking metrics mentioned by respondents• Future carbon emissions• GHG emissions intensity• Physical carbon intensity• Carbon exposure• Investment screening from climate
related risk
• Qualitative & quantitative evaluationsof climate VaR• Revenue intensity• % of companies in Science-Based
Targets Initiative• Weighted average carbon intensity• MSCI ESG index scores• Water usage• Environmental impact of project finance• Climate sensitivity• Physical, regulatory, transition risks related
to climate change• Green/brown share

Q7: In what way are forward-looking climate-related metrics used within your organization? Check all that apply.

Summary information represents percentage that checked at least one use case.
Base: Respondents (n = 209)5

Forward-looking financial metrics | Use and disclosure

Respondents leverage a broad universe of metrics across a range ofuse cases-with asset managers reporting the highest use
Use of forward-looking metrics
Financial services only
73%
64%

71%

66%

68%

62%
57%
50%

46%57%

50%
43%

43%

54%

43%
38%

For internal risk management,
strategy, or financial planning

For investment/portfolio
allocation decisions

For engagement withcompanies in which we invest

For communication withinvestors or other stakeholders

Bank

Asset owner

Q7: In what way are forward-looking climate-related metrics used within your organization? Check all that apply.
Base: Respondents in financial services (n = 96); includes respondents from banks, asset managers, asset owners,
and those from other financial services firms, including stock exchanges, index providers, insurance, and ESG ratings

Asset manager

Other6Forward-looking financial metrics | Use and disclosure

But fewer report using the metrics described in the consultation, andmore often for monitoring than financial decisions
Forward-looking metrics used for decision making
Financial services only

Implied temperature rise or warming potential

15%

Climate value-at-risk

23%

Unpriced carbon cost

20%

15%

Carbon earnings at risk

The proportion of underlying investmentsthat are aligned with the EU Taxonomy

34%

26%

A forward-looking estimate of carbon-related assets
in each portfolio over the course of planning horizon

Amount of apportioned emissions
over/under a 1.5°C alignment trajectory

43%

27%

5%

18%

Monitoring

Q10: Please select any metrics your organization uses for financial decisions, monitoring, or to consider thepositioning of your total portfolio with respect to the transition to a lower-carbon economy:
Base: Respondents in financial services (n = 96); includes respondents from banks, asset managers, asset owners,
and those from other financial services firms, including stock exchanges, index providers, insurance, and ESG ratings

33%

27%

24%

29%

18%
18%
16%

38%

24%

31%

23%
Portfolio positioning

Financial decisions

7Forward-looking financial metrics | Use and disclosure

A minority of firms currently disclose the consultation metrics, withmore planning to do so in the future
Disclosure of metrics
Those using forward-looking metrics

Implied temperature rise or warming potential

12%

33%

55%

Climate value-at-risk

12%

36%

52%

A forward-looking estimate of carbon-related assets
in each portfolio over the course of planning horizon

10%

Unpriced carbon cost10%

24%

66%

Carbon earnings at risk

11%

25%

64%

Amount of apportioned emissions
over/under a 1.5°C alignment trajectory

9%

27%

64%

The proportion of underlying investmentsthat are aligned with the EU Taxonomy

7%

31%

59%

40%
Currently disclose

Q12: Which of the following metrics does your organization disclose?
Base: Respondents using consultation metrics (n = 162); 22% do not use such metrics and were excluded fromthe analysis

53%
Planning to disclose

No plans to disclose

8Forward-looking financial metrics | Use and disclosure

Half of respondents say that disclosure would be worth the effort
with further standardization of metrics
Current perceptions of disclosure for forward-looking metrics

The benefits will outweigh the challenges
if there is further standardization of metrics

44%

The challenges outweigh the benefits

21%

53%

50%

27%
Challenges are proportionate to the benefits

10%

52%

13%
11%

37%
6%

The benefits outweigh the challenges now

26%
11%
Investment/
asset mgmt

Q18: How do you currently view disclosure for forward-looking climate-related metrics?
Base: Respondents (n = 209)

Finance17%
Sustainability

24%

Other9Forward-looking financial metrics | Methodology considerations

Respondents agreed with a wide variety of current challenges withusing and disclosing forward-looking metrics…
Challenges faced using or disclosing forward-looking metrics
Financial services only

Concerns around reliance on assumptions required
to derive future company-level emissions
Concerns around reliance on assumptions
and future uncertainty

72

48

Lack of/poor quality GHG emissions data

68

44

Lack of comparable metriccalculation methodologies

66

50

Resource constraints

65

41

Lack of/poor quality of other data(non-GHG emissions)6541

Distrust in the reliability of outcomes

5337

6155
Challenge using

Q35: Which challenges has your organization faced in using or disclosing forward-looking metrics?
Base: Respondents in financial services (n = 96); includes respondents from banks, asset managers, asset owners,
and those from other financial services firms, including stock exchanges, index providers, insurance, and ESG ratings

74

53

Difficult to understand or opaque
metric calculation methodologies

Metrics are useful internally but notsuitable for public disclosure

7748

Challenges disclosing10

Forward-looking financial metrics | Methodology considerations…and noted that most could be useful with improvements
to methodology
Forward-looking metrics could be useful with improvements to methodology

The proportion of underlying investmentsthat are aligned with the EU Taxonomy

53

Climate value-at-risk

52

Amount of apportioned emissions over/under
a 1.5°C alignment trajectory

50

Implied temperature rise or warming potential

49

Carbon earnings at risk

49

Unpriced carbon cost48

A forward-looking estimate of carbon-related assets ineach portfolio over the course of planning horizonOther

Q26: Which of the following metrics do you find useful for financial decision-making? Select (1) useful now,(2) could be useful with improvements to methodology, (3) not useful
Base: Respondents (n = 209)

47

43

11

Forward-looking financial metrics | Methodology considerations

Improvements should focus on transparency, standardization, andcomparability as well as improved emissions data
Factors that would improve usefulness of forward-looking metrics

More clarity and transparency in calculation methodologies

76

Better availability and quality of GHG emissions data

73

More comparable approaches to calculation methodologies

71

Use of standard forward-looking emissions pathways

More useful narrative content

Q37: Which of these changes would improve the usefulness of forward-looking disclosures for you?
Base: Respondents (n = 209)

68

45

12

Forward-looking financial metrics | Methodology considerations

Almost all would like methodology to cover Scope 1 and 2 emissions,with many interested in Scope 3 coverage
GHG emissions scopes in ideal forward-looking methodology
Financial services only

90%
82%

Relevant excerpts on Scope 3
Scope 3 emissions should be included
for financial holdings in sectors where
Scope 3 constitutes a significant
portion of emissions, such as Oil, Gasand Autos.

95%

86% 86%79%79%

77% 77%

71%

69%

64%

GHG emissions data not considering
scope 3 would not paint a full pictureof the company's progress on Parisalignment.
Scope 3 could be covered with thecaveat that current Scope 3 data is notvery granular and largely amounts toan industry-level coefficient. However,this type of coefficient is important inshowing how certain sectors haveenormous Scope 3 footprints
compared to others.

BanksAsset managers

Asset owners

Scope 1

Other

Scope 2

Scope 3

Q22: Which GHG emissions scopes should be covered in an ideal forward-looking methodology for metrics related
to emissions? Select all that apply.
Base: Respondents in financial services (n = 96); includes respondents from banks, asset managers, asset owners,
and those from other financial services firms, including stock exchanges, index providers, insurance, and ESG ratings

Scope 3 is challenging given theinconsistent reporting and difficulty inaccurate measurement compared to
Scope 1 & 2 - but it is critical for certain
sectors such as autos,
oil & gas.

13