Raymond Davies, Emerging Market Partners Ltd

1. Climate Change – New Corporate
Reporting Recommendations
Presentation By
Mr Raymond M Davies

2. ESG
• ESG refers to Environmental, Social and Governance, to
which businesses now need to pay particular regard
• Environmental conservation and sustainability including
climate change
• Social-stakeholder relationships including human rights,
diversity , working conditions
• Governance – way in which the business is directed and
controlled.

3. Background to the TCFD
• The Financial Stability Board established the Task
Force on Climate-related Financial Disclosures (TCFD) in
December 2015
• The Task Force comprised of 32 international members
from the Financial and non-Financial sectors with the
remit to provide more informed Disclosures on Climate
Change to enable stakeholders to better understand
the concentrations

4. Three Problems-One Solution
• Issuers have an obligation under existing law to
disclose all material risks but lack a coherent
framework for Climate- related Risk.
• Lenders, insurers and investors need decision-
useful climate related risk information.
• Regulators need to understand the risks that may
be building up in the Financial Systems.

5. The Task Force’s Recommendations and Guidance:
‒Can apply to any company in the world and can be scaled to any level of
sophistication
‒Should be addressed in financial filings
‒Are designed to solicit decision-useful information for investors and others
‒Encourage forward-looking information through scenario analysis
‒Provide additional guidance to sectors and industries most impacted by
climate change
‒Apply to organizations across the financial sector to address the full
investment chain
‒Place greater emphasis on risks and opportunities related to the transition
to a lower-carbon economy
‒Represent consensus of Task Force members, who come from the financial
sector and various non-financial sectors
Task Force Recommendations

6. Evaluating Financial Impact

7. Disclosure Recommendations (1/2)
• The Task Force developed four widely-adoptable recommendations on climate-
related financial disclosures that are applicable to organizations across sectors
and jurisdictions.
• The recommendations are structured around four thematic areas that represent
core elements of how organizations operate:
• Strategy
• The actual and potential impacts of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning
• Risk Management
• The processes used by the organization to identify, assess, and manage climate-
related risks
• Metrics and Targets
• The metrics and targets used to assess and manage relevant climate-related risks
and opportunities
• Governance
• The organization’s governance around climate-related risks and opportunities

8. • The four recommendations are supported by
specific recommended disclosures organizations
can include in financial filings to provide decision-
useful information about their climate-related
risks and opportunities.
Disclosure Recommendations (2/2)

9. Recommendations and Supporting
Recommended Disclosures

10. Disclosure Guidance for all Sectors
• The Task Force developed guidance to assist organizations in implementing the
recommended disclosures. The guidance builds on the recommendations and the
recommended disclosures.
Recommendations
• Four widely adoptable recommendations tied to: governance, strategy, risk management,
and metrics and targets
• Recommended Disclosures
• Specific recommended disclosures organizations should include in their financial filings to
provide decision-useful information
• Guidance for All Sectors
• Guidance providing context and suggestions for implementing the recommended
disclosures for all organizations
• Supplemental Guidance for Certain Sectors
• Guidance that highlights important considerations for certain sectors and provides a fuller
picture of potential climate-related financial impacts in those sectors
• Supplemental guidance is provided for the financial sector and for non-financial sectors
potentially most affected by climate change

11. Implementation Time-Frame
• How soon do companies have to start thinking about the
recommendations:
• The TCFD has proposed a five year time from 2017 over which
voluntary disclosures will become increasingly sophisticated
• Work which companies have done on environmental and
sustainability reporting will be relevant to the Disclosure
requirements.
• The TCFD takes the view of the investor and looks at the
effect of climate change on the business of the company.

12. Conclusion
• The benefit of adopting and understanding climate related
opportunities and risk will depend on the exposure of the
business model to climate change impact e.g. fossil fuel.
• Companies can find the TCFD final recommendations and
guidance report on TCFD website --- www.fsb-tcfd.org and
this is provided alongside an annex on implementation
• The TCFD recommendations and guidance will evolve into
board level strategic tool to implement and communicate
how the business will manage its climate financial risk and
opportunities.
• Assistance may also be sought from the Carbon Trust – visit
www.carbontrust.com/tcfd.

13. Update
• The TCFD Framework is not mandatory but
since the report issued by the Financial
Reporting Council (FRC) in 2020 on Climate
Thematic we are moving towards a Regulatory
Framework.
• The IASB Foundation has also established the
Sustainability Standards Board with increasing
focus on climate change