What is the Task Force On Climate-Related Financial Disclosure and why is it important for businesses?

The Task Force on Climate-related Financial Disclosure (TCFD) was formed by the Financial Stability Board (FSB), an international body that aims to protect global financial markets from systemic risks, such as climate change. 

Financial markets need to price risk correctly to support informed, sound capital-allocation decisions. Financial markets therefore need accurate and timely disclosure from companies to perform this function. Investors and other market participants will not be able to price or value assets without this crucial information, which can lead to the misallocation of capital. 

The FSB recognised that climate change is not only an environmental risk, but fundamentally a significant global financial risks, which must be considered in all capital allocation decisions. Therefore, the TCFD was formed to develop recommendations on the types of information companies should disclose to support the financial markets and its participants, such as investors, lenders, and insurance underwriters in their tasks of assessing and pricing a specific set of risks (and opportunities) related to climate change.