The Task Force on Climate-related Financial Disclosures (TCFD) was established to support financial markets in adapting to the impacts and increasing financial losses caused by climate change. From 2023 there are mandatory requirements for companies to report.The Task Force broke down climate-related risks into two major categories:
Risks related to the transition to a lower-carbon economy, and risks related to the physical impacts of climate change.
Transition risks include shifts in policy and litigation, market, technology and reputation. Organisations are already seeing this impact with climate-related litigation and policy changes rising. Costs of operation, raw materials, and products are all vulnerable to shifts in policy, technology, and markets. And changes in consumer preferences and customer behaviour must also be taken into account.
Physical risks involve the effects of climate change on the natural world. These are broken down into two categories: acute and chronic risk. Acute risk involves extreme weather events such as wildfires or floods. Chronic risk refers to longer-term shifts in climate patterns. These could affect anything from an organisations supply chain to their employees’ safety.