What is the Task Force on Climate-related Financial Disclosure?
At the end of last year, a global climate agreement was secured in Paris at COP-21 (the United Nations Climate Change Conference). For the first time in history we saw every country in the world come together in a single agreement to tackle climate change and, significantly, to agree to take steps to keep global temperatures well below 2°C above pre-industrial times; the temperature above which scientists state climate change would reach dangerous and irreversible levels.
This agreement is a significant step forward; while the direct, human-related risks posed by climate change are profound, the impact on global financial stability cannot be overlooked. This is why the task force came into being.
The Financial Stability Board (FSB), chaired by Mark Carney, is tasked with monitoring and making recommendations about the financial system. Following the financial crisis in 2008/09, it was deemed that had regulators across the globe been privy to more disclosures, perhaps the warning signs would have been seen and mitigated.
In the same vein, if we can set out and monitor the financial risks stemming from climate change, we will be better placed to mitigate the long-term impact on global financial stability.
This industry-led task force, formed of 30 representatives from the financial sector, aims to develop a consistent set of climate-related financial risk disclosures which can be used by companies to provide information, and in turn will allow market participants and policymakers to better understand and manage climate-related financial risks.