UNEP FI TCFD Banking Pilot Projects 

Since 2017, UNEP FI has been working with its members to better equip the banking industry to implement the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). Now in its third phase of work, the programme has brought together more than 40 banks on six continents to pilot the recommendations and jointly develop tools and guidance. UNEP FI and the banks are being supported in this work by a wide range of expert partners.

The first phase of the project developed transition and physical assessment models and metrics to enable scenario-based, forward-looking assessment and disclosure of climate-related risks and opportunities. The second phase built on the previous work, helping banks enhance their climate risk toolkits and improve their climate risk disclosures. The work focused on the four pillars of TCFD disclosures – Governance, Strategy, Risk Management, and Metrics and Targets – developing tools, frameworks, and thought papers that enabled participants to better address each of the recommended disclosures within these pillars. Beyond building capacity for participants, the Phase II outputs aimed to establish good practices for TCFD disclosures across the financial sector.

The third phase commenced in January 2021 and is currently being developed. It includes nearly 50 banks and investors who are exploring ways to add depth, granularity, and nuance to their climate risk assessments, consolidate best practices in climate risk management, and standardize climate disclosures across the industry. Using a flexible programme format, these institutions are building capacities around climate stress testing, sectoral risk assessments, and portfolio-implied temperature evaluations among others.

In order to address the needs of a large and diverse program, the third phase of our TCFD pilot program will be split into two parts:

  • A TCFD roadmap that UNEP FI has developed to empower institutions at all levels of TCFD disclosure to better understand climate risks and disclosures. Participants will engage with the industry-leading tools, scenarios, and frameworks produced by UNEP FI and its expert partners. The structured roadmap will allow institutions to plug in at any point and to use the roadmap materials to disseminate climate risk knowledge throughout their organization.
  • Targeted modules for small groups of institutions to partner with global experts to address cutting-edge climate risk questions. The modules will be the site of the most groundbreaking work on the most pressing topics on climate risk and disclosure. Key outputs, among others, will include guidance on sectoral and regional risk and opportunity evaluations, quantitative comparisons of risks under different climate scenarios, and a framework for conducting a climate stress test.

If you are interested in participating in Phase III or would like to learn more, please contact David Carlin. Find all the outputs from the first two phases below:

 

Outputs:

Phase I


 

Phase II

The following clickable chart shows how each specific output from Phase II connects to a TCFD pillar.

 

 

  • Charting a New Climate (with Acclimatise)- a state-of-the-art blueprint to support financial institutions in navigating the changing physical climate risk landscape. The report explores physical risk data, tools, correlation analyses, heatmapping, and opportunity identification among other crucial topics.
  • From Disclosure to Actiona stock-take on how financial institutions are incorporating climate risk into their operations. Numerous bank case studies and UNEP FI TCFD participant survey results provide details on the latest practices. The paper also provides concrete and actionable guidance on integrating climate risk throughout an organization.
  • Beyond the Horizon– an exploration of the ways in which the UNEP FI TCFD program advanced transition risk analysis. A major feature of the report is a comprehensive transition risk heatmap developed by the participating institutions that provides perspectives into how climate-sensitive sectors may be impacted by a low-carbon transition.
  • TCFD Playbook (with the Institute for International Finance)- developed through consultation with member financial institutions, this document provides guidance on and examples of leading practices around TCFD reporting in the financial sector. This desk reference also aims to enhance the depth and comparability of TCFD disclosures by financial institutions.
  • Transition Check (with Oliver Wyman)- a user-friendly webtool that enables financial institutions to assess transition risks across a wide range of geographies, economic sectors, and climate scenarios (including the latest NGFS scenarios). Transition Check produces loss estimates, PDs, and LGDs in a clean, downloadable format to support internal assessments and TCFD reporting.
  • Pathways to Paris: A practical guide to climate transition scenarios for financial professionals is a detailed guide, in partnership with CICERO, for financial sector practitioners looking to understand and apply climate scenarios in a financial risk context. This paper also provides a series of recommendations for enhancing the development and application of Integrated Assessment Models (IAMs) by financial institutions based on perspectives of participating banks that used UNEP FI’s transition risk methodology. This paper also contains case studies from participating banks that capture their experiences using climate scenarios.
  • Decarbonisation and Disruption: Understanding the financial risks of a disorderly transition using climate scenarios covers two primary themes of relevance to financial institutions, with support from Oliver Wyman. First, it examines sector specific risk drivers that could result in a disorderly transition, making the argument that climate transition risk is a significant near-term threat to much of the economy. Second, the report explored how these risk drivers are currently being modeled in climate scenarios produced by major integrated assessment models (IAMs). The paper also includes bank case studies that affirm greater economic risks associated with disorderly transition scenarios compared with orderly transition scenarios.
  • The Climate Risk Landscape: Mapping Climate-related Financial Risk Assessment Methodologies provides a summary of the key developments across third party climate risk assessment providers since May 2019, including new and updated scenarios, methodological tools, key guidelines, as well as an overview of the changing regulatory landscape and potential developments into 2021.
  • TCFD database (to be released in 2021) UNEP FI produced an exhaustive survey of our membership regarding climate disclosure and climate scenario analysis practices. Now, we are working to make this data accessible to financial institutions so that they can benchmark their practices to others across the industry.

 

Regional Reports

 

The following banks have taken part in UNEP FI’s TCFD programme: