The Guide aims to improve climate-related risk disclosure in organizations’ mainstream reports.

By Paul A. Davies and Kristina S. Wyatt

The Sustainability Accounting Standards Board (SASB) and Climate Disclosure Standards Board (CDSB) have issued a Taskforce on Climate-Related Financial Disclosures (TCFD) Implementation Guide designed to foster improved reporting of climate-related information. The TCFD has enjoyed widespread support since its formation in 2015, yet relatively few organizations are applying the TCFD’s reporting guidance to address climate impacts in their disclosure documents.[i] The new Implementation Guide is designed as a “how to” manual to remedy this disclosure gap. The Guide aims to help companies to enhance the robustness, consistency, and utility of their climate disclosures by applying the disclosure guidance offered by the SASB and CDSB within the TCFD framework. This application of the TCFD, CDSB, and SASB standards should help companies to craft disclosures in harmony with the TCFD’s principles-based framework and the disclosure principles offered by the CDSB and SASB.


“Companies can leverage the existing SASB and CDSB resources to jumpstart their implementation of the TCFD recommendations. In so doing, they can enhance their understanding, assessment, and management of key climate-related risks and opportunities while also contributing to more efficient, stable and resilient capital markets.” (Climate Disclosure Standards Board – TCFD Implementation Guide, 2019, p. 5)

The Financial Stability Board (FSB) formed the TCFD to provide a framework for consistent, actionable disclosures of climate-related information with the goal of facilitating a smooth transition to a climate-resilient economy. The TCFD issued disclosure guidance in 2017 that emphasized four key areas of focus: (1) governance; (2) strategy; (3) risk management; and (4) metrics and targets. While broadly supported across industries and by market participants, the TCFD’s guidance has not yet resulted in the widespread improvement in publicly available climate-related information that the FSB had hoped for.

Rather than create new guidance, the TCFD Implementation Guide proposes overlaying the TCFD’s principles with existing CDSB and SASB standards to encourage more actionable, robust disclosures. This approach recognizes the close alignment of the CDSB and SASB guidance with the TCFD principles, and leverages the broad and growing global adoption of the CDSB and SASB standards. The CDSB framework focuses on eliciting disclosure of the full range of climate and environmental risks and opportunities in organizations’ mainstream reports. The SASB standards provide an additional layer of guidance that is at once broader in scope — addressing social and human capital as well as environmental issues — and narrower in focus — drilling down into issues that are financially material and specific to targeted industries.

How Should Companies Apply the CDSB Disclosure Framework?

The Implementation Guide adopts 11 principles set forth in the CDSB’s 2017 Practical Action TCFD Checklist, including:

Governance (Principles 1,2)

Securing the support of the board of directors and senior executive leadership is critical. The Implementation Guide recommends disclosing the role of the board in overseeing and guiding the company’s response to climate-related risks and opportunities. Further, the Guidance challenges boards to integrate climate change issues into their strategic and financial decision-making processes and to address climate change risks, as appropriate, at the risk and audit committee levels of the board.

Integration Across the Organization (Principle 3)

The Implementation Guide emphasizes the importance of breaking down silos and sharing information within the organization. Cross-functional collaboration among finance, compliance, governance, sustainability, and other groups is critical to identifying and understanding the climate risks and opportunities that the entity faces. This understanding, in turn, is necessary if the organization is to properly manage its risks, capitalize on opportunities, and report on these risks and opportunities.

Financial Impacts; Scenario Analyses (Principles 4,5)

The Implementation Guide urges companies to evaluate the financial effects of climate change and the projected impacts of these effects on the income statement and balance sheet. Two categories of climate risk should be included in the evaluation: physical climate risks (such as those related to extreme weather, flooding, drought, or fires) and transitional climate risks and opportunities (such as those related to the transition to a lower carbon economy, resource conservation, and the development of new products and processes).

Recognizing that the specific future impacts of climate change can involve uncertainty and that the most significant impacts are likely to be felt in the medium to long term, companies are encouraged to apply and disclose scenario analyses to assess the range of potential outcomes based on assumed climate scenarios.

Adapting Existing Processes and Tools (Principles 6, 8)

The Implementation Guide encourages organizations to use existing enterprise risk management and related processes to assess and prioritize climate change risks. Similarly, organizations should evaluate existing tools that they use to collect and analyze climate-related information. For example, more than 7,000 companies disclose climate and environmental data through the Carbon Disclosure Project (CDP) and the CDP questionnaire is aligned with the TCFD recommendations. Hence, organizations are encouraged to consider using the data already collected pursuant to the CDP as a starting point for their climate-related disclosures. The CDSB and SASB resources can then provide guidance in taking the disclosures further.

Quality Assurance (Principles 9, 10)

The quality assurance and compliance methodologies for climate information should mirror the methodologies used for financial information. External assurance can bolster the company’s compliance and disclosures. Even if the company does not seek external assurance of climate information, the company should prepare the report as though it were going to seek assurance, focusing particularly on balance, completeness, accuracy, consistency, and comparability.

Engagement With Investors and Integration of Information in Financial Reports (Principles 7, 11)

The Implementation Guide acknowledges the role that investors play in shaping the climate-related information that companies disclose. Organizations are encouraged to engage with investors in order to learn what information is most salient, and to make their disclosures useful and actionable.

When integrating climate-related information in the annual report, organizations should attempt to connect this information to the other disclosures in the report. Rather than simply dropping climate disclosures into a stand-alone section of the report, organizations should consider how climate risks and opportunities impact the discussion of the company’s business, its Management’s Discussion and Analysis of Financial Condition and Results of Operations, its financial statements, and potentially other sections.

“Companies need to think about how to best use the existing structure of their mainstream annual reports to integrate these new disclosures. Think of integration and connectivity as your north star. Your annual report should tell a clear and coherent story, and guide the report user, connecting the dots between governance, strategy, risk management, target-setting and performance.” (Climate Disclosure Standards Board – TCFD Implementation Guide, 2019, p. 10)

Sample Disclosures to Aid Real-World Application

The Implementation Guide answers the call from corporate issuers for real-world disclosure guidance. The Guide provides mock disclosures from a fictitious but realistic oil and gas company, a global agricultural products company, and a global automobile manufacturer. These mock disclosures are based on the TCFD’s review and analysis of real companies’ disclosures. The disclosures cover the four core themes of climate-related financial disclosures: governance, strategy, risk management, and metrics and targets. The examples illustrate how companies in the selected sectors might approach climate-related disclosures. They also map the specific disclosure elements to relevant provisions in each of the disclosure frameworks — the TCFD, CDSB, and SASB. The Guide also emphasizes that a company should first look to the applicable disclosure rules and guidance of the relevant jurisdiction in which it operates. The TCFD, CDSB, and SASB frameworks can sit atop that disclosure guidance. Finally, the Guide emphasizes that the current climate reporting regime is dynamic and rapidly changing. What is considered a best practice today likely will change over time as climate-related risks and opportunities evolve, and as the reporting of those risks and opportunities becomes better integrated in companies’ mainstream reports.

[i] The Implementation Guide indicates that, as of March 2019, 617 organizations representing more than US$8 trillion in market capitalization had publicly supported the TCFD’s recommendations, and yet a far smaller number appear to be implementing the recommendations in their public disclosure documents.