A) Describe the organization’s processes for identifying and assessing climate-related risks.
B) Describe the organization’s processes for managing climate-related risks.
C) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.
Guidance for All Sectors
Organizations should describe their risk management processes for identifying and assessing climate-related risks. An important aspect of this description is how organizations determine the relative significance of climate-related risks in relation to other risks.
Organizations should describe whether they consider existing and emerging regulatory requirements related to climate change (e.g., limits on emissions) as well as other relevant factors considered.
Organizations 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.
Organizations should describe their processes for managing climate-related risks, including how they make decisions to mitigate, transfer, accept, or control those risks. In addition, organizations should describe their processes for prioritizing climate-related risks, including how materiality determinations are made within their organizations.
In describing their processes for managing climate-related risks, organizations should address the risks included in Tables A1.1 and A1.2 (pp. 75–76), as appropriate.
Organizations should describe how their processes for identifying, assessing, and managing climate-related risks are integrated into their overall risk management.
Supplemental Guidance
For Banks
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”).
No supplemental guidance
No supplemental guidance
For Insurance Companies
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.
Insurance companies should describe key tools or instruments, such as risk models, used to manage climate-related 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.
No supplemental guidance
For Asset Owners
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.
Asset owners should describe how they consider the positioning of their total portfolio with respect to the transition to a lower-carbon energy supply, production, and use. This could include explaining how asset owners actively manage their portfolios’ positioning in relation to this transition.
No supplemental guidance.
For Asset Managers
Asset managers should describe, where appropriate, engagement activity with investee companies to encourage 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 each product or investment strategy. This might include a description of the resources and tools used in the process.
Asset managers should describe how they manage material climate-related risks for each product or investment strategy.
Asset managers should also describe how each product or investment strategy might be affected by the transition to a lower-carbon economy.
No supplemental guidance.
For Non-Financial Groups
No supplemental guidance.
No supplemental guidance.
No supplemental guidance.
Further Information
- Glossary and Abbreviations
- Implementation path
- More information on Supplemental Guidance for the Financial Sector
- Examples of Climate-Related Risks and Opportunities and Potential Financial Impacts
- Assessing financial impacts of climate-related risks and opportunities
- Guidance on Risk Management Integration and Disclosure
- TCFD Guidance on Risk Management Integration and Disclosure
- TCFD Risk Management Workshop
Resources to get you started
- How to improve your TCFD Risk Management disclosures
- Enterprise Risk Management Integrating with Strategy and Performance
- Climate Financial Risk Forum Guide 2020: Risk Management Chapter
- Climate Change Risk Management in Financial Services
- Carbon Asset Risk: From Rhetoric to Action
- Measuring Physical Climate Risk in Equity Portfolios
- Online Course: An introduction to managing the financial risks from climate change
For more resources, search here.