Climate Risks Reporting and Swiss Regulations – Is your firm ready?
In this Blog-Post you will find valuable information on the TCFD Reporting Framework – what is it? How did it evolve? What does it mean for you and your business? You will also be able to understand better the complex interlinkages between climate-related risks and your business’ financial stability.
What is TCFD?
TCFD stands for the Task Force on Climate-related Financial Disclosures. It was launched in 2015 by the Financial Stability Board (FSB) to improve and increase reporting of climate-related financial information. In 2017, the Task Force published a first report presenting a framework of recommendations that are widely adoptable and applicable to organizations across sectors and jurisdictions. Those recommendations are designed to solicit decision-useful, forward-looking information that can be included in mainstream financial filings. The recommendations are structured around four thematic areas that represent core elements of how organizations operate: governance, strategy, risk management, and metrics and targets.
TCFD is more than just another reporting framework. It offers a comprehensive framework that allows companies to identify the impacts of climate change that are specific to their business and to strategically manage the resulting financial risks, as well as opportunities.
The Task Force divided climate-related risks into two major categories: 1) risks related to the physical impacts of climate change, such as increased severity of floods and 2) risks related to the transition to a lower-carbon economy, such as changes in policies that lead to an increased pricing of GHG emissions. This categorisation is a starting point for firms to understand how climate could affect their business – in a good or bad way.
The TCFD also emphasizes on the transmission paths that climate risk and opportunities can take in order to impact business. The following diagram depicts this transmission channel very clearly:
Climate risks and opportunities can affect the strategic planning and the risk management of a firm, which will trickle down to having a financial impact on every parts of the financial flow of a firm. Climate risks and opportunities have direct impacts on firms and should not be underestimated by firms.
The success of the TCFD’s recommendations can be demonstrated by its widespread implementation. It reached more than 4'900 supporters and so far, 19 jurisdictions across the globe, accounting for close to 60% of global 2022 GDP, proposed TCFD-aligned disclosure requirements.
In October 2023 the TCFD was disbanded. The FSB asked the International Financial Reporting Standards (IFRS) Foundation to take over the monitoring of the progress of companies’ climate-related disclosures. The TCFD framework is now being continuously developed by the International Sustainability Standards Board (ISSB), which is part of the IFRS Foundation, using a new denomination – IFRS S1 and IFRS S2.
Why are we talking about it now?
The Swiss Sustainability Advisors’ community is extensively talking about the TCFD framework right now because the ordinance on mandatory climate disclosures for large companies was brought into force as of 1st January 2024 by the Federal council.
Public companies, banks and insurance companies with 500 or more employees and at least CHF 20 million in total assets or more than CHF 40 million in turnover are obliged to report publicly on climate issues. Public reporting involves disclosures not only on the financial risk that a company incurs as a result of climate-related activities, but also on the impact of the company's business activities on the climate.
A “Swiss touch” to the TCFD framework is the fact that a company has to describe the reduction targets it has set for its direct and indirect greenhouse gas emissions, as well as how it plans to implement them (transition plan).
With this new regulation – that is already in force, and that obliges firms to disclose as of 2025 for 2024 – firms have to identify, assess and disclose their climate-related risks and opportunities, by developing different processes and putting in place a monitoring framework.
The ordinance currently only applies to large firms (more than 500 employees), but a new version of the ordinance has been put into consultation in autumn 2023 and would, among other things, lower the number of employees from 500 to 250. Meaning that a large number of mid-size firms would have to comply with the ordinance. This new ordinance is now in consultation and the Federal authorities will give further details in summer 2024.
How can Swiss Climate support you?
Our experienced team is ready to support our clients with their individual needs.
We are always informed of the latest standards and regulatory developments in Switzerland and internationally so that we can provide you with personalised advices and support – spanning from a simple advice to a detailed portfolio analysis.
Thanks to our many years of experience in the field of sustainability and carbon footprint calculations, we have an excellent understanding of climate risks, physical or transitional, as well as climate opportunities, which enables us to advise our clients in a targeted manner and support them in the publication of their TCFD report. Our multi-disciplinary approach enables us to assist our clients in all facets of reporting – governance, strategy, risk management, metrics and targets.
In addition, we support our clients in calculating their carbon footprint and analysing their financed emissions (scope 3.15) - both essential elements of the TCFD requirements.
Your Benefits
- TCFD has broad buy-in from policymakers, international companies, investors and NGOs. Globally, it is seen as the best-practice guidance to integrate effective management of climate-related issues in your company.
- The recommendations lay out a clear-cut plan that helps companies to seize climate-related opportunities and manage associated business risks.
- With our experience in climate consulting services at Swiss Climate we can help you become a business leader in the transition to a low carbon economy and make best use of opportunities on your climate journey.
- In Switzerland, TCFD is part of the broader legal requirement of the counterproposal to the RBI on sustainability disclosure for larger companies.
- With our consulting expertise, we can further support you in aligning your sustainability reporting with the mandatory requirements on non-financial reporting, including other environmental topics, social topics, anti-corruption, respect for human rights and employee topics.
Our offering is constructed of many different blocks, which makes it very flexible and tailored to your business’ needs. Please don’t hesitate to get in touch with us for more information.
We already have supported many banks and asset managers in Switzerland in the publication of their first TCFD report and we are looking forward to support your firm very soon!
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