The Task Force on Climate-Related Financial Disclosures (TCFD) was created in 2015 by the Financial Stability Board (FSB) to develop consistent climate-related financial risk disclosures for use by companies, banks, and investors in providing information to stakeholders. Increasing the amount of reliable information on financial institutions’ exposure to climate-related risks and opportunities will strengthen the stability of the financial system, contribute to greater understanding of climate risks and facilitate financing the transition to a more stable and sustainable economy.

Following the publication of the final recommendations by FSB’s TCFD in June 2017, UNEP FI began a series of ‘TCFD Pilot Projects’ for banks, investors, and insurers. Participants in these pilots have worked to pioneer practical approaches for the assessment and disclosure of climate risks and opportunities.

Further detail about the content of each project can be found below.

UNEP FI TCFD Banking Pilot Project 

Phase I

UNEP FI collaborated with sixteen global banks to develop methodologies to assess physical and transition risks and opportunities. This development process engaged expert consultancies including Acclimatise (for physical risk) and Oliver Wyman (for transition risk), as well as leading climate modelers from the Potsdam Institute (PIK) and IIASA. This year-long programme created analytical tools and indicators for banks seeking to assess and disclose their climate-related risks and opportunities. The programme concluded with the release of two comprehensive reports on the implementation of the FSB’s TCFD recommendations for physical and transition risks.

Navigating a New Climate: Assessing Credit Risk and Opportunity in a Changing Climate – Report assesses Physical Risk and Opportunities

Extending our Horizons: Assessing Credit Risk and Opportunity in a Changing Climate– Report assesses Transition (Policy) Risk

 

Phase II

Work in the second phase builds on approaches and methodologies developed in  Phase I and engages thirty-nine global banks on six continents. The pilot aims to expand the toolkit for banks to measure, manage, and disclose climate-related risks and opportunities. Key areas of investigation include climate scenarios, climate risk assessment methodologies, and climate risk governance. UNEP FI has worked with a variety of technical partners in this pilot from the climate scenario researchers at CICERO to individual sector experts.

The pilot has been helping participants better assess the climate risks that they face and integrate the insights generated into sustainable long-term strategies. Elements of the pilot have also focused on preparing participants for climate stress tests and other emerging climate regulations.

As a culmination of the pilot, several deliverables are anticipated for July 2020. These include a “blueprint” for assessing physical risk as well as a series of papers on how climate scenarios are being used to assess transition risk. Additional deliverables involve the creation of a transition risk heatmap, a TCFD disclosure template (with support from the Institute for International Finance), and a transition risk webtool (developed in tandem with Oliver Wyman).

Phase III

Phase III of the TCFD banking pilot is expected to commence in September 2020. This pilot will more fully explore climate stress testing, the integration of physical and transition risk assessments, and sector-specific risks and opportunities. If you are interested in participating in Phase III or would like to learn more, please contact David Carlin (David.Carlin@un.org).

UNEP FI TCFD Investors Pilot Project 

Phase I

UNEP FI together with twenty of the world’s leading asset managers and owners conducted the TCFD pilot project for investors. Participants in the pilot developed scenarios, models, metrics and, ultimately, a risk assessment tool to enable investors to assess climate risk across their portfolio. Technical partners included Carbon Delta (now MSCI) and Vivid Economics. The work conducted during the pilot was detailed in a final report for the benefit of the investment sector.

Changing Course– A comprehensive investor guide to scenario-based methods for climate risk assessment in response to the recommendations of the TCFD including case studies from participating investors.

 

A companion report on the methodology and results from investors with direct real estate equity exposure was also produced and can be accessed here.

 

Phase II

Phase II of the TCFD investor pilot is expected to commence in September 2020. This pilot will expand on the work in Phase I by introducing new climate risk assessment methodologies and exploring sector-specific risks and opportunities. If you are interested in participating in Phase II or would like to learn more, please contact David Carlin (David.Carlin@un.org).

UNEP FI TCFD Insurers Pilot Project 

UNEP FI together with sixteen of the world’s leading insurance companies will launch the UNEP FI TCFD Pilot Project for Insurers. Insurers are joining UNEP FI’s pilot project to implement the recommendations of the TCFD and assess risks on their life and non-life businesses.

Additional Resources:

Useful insight on TCFD from beyond UNEP FI

For more information on TCFD-related initiatives contact Remco Fischer (kai.fischer@un.org).

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