What is TCFD?

What is TCFD?

The Task Force on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board in 2015, chaired by Michael Bloomberg, to develop recommendations for consistent climate-related financial disclosures. Its final recommendations, published in June 2017, organized climate disclosure around four pillars—governance, strategy, risk management, and metrics and targets—and introduced climate scenario analysis as a disclosure expectation. The TCFD was formally disbanded in October 2023 after its framework was absorbed into the ISSB's IFRS S2 standard, but its influence persists as the structural DNA of virtually every climate disclosure regulation globally.

Why It Matters

TCFD fundamentally changed how capital markets engage with climate risk. Before TCFD, climate disclosure was a corporate responsibility exercise disconnected from financial analysis. TCFD reframed climate change as a financial risk and opportunity relevant to investors, lenders, and insurers—and created a common language for discussing it. The four-pillar structure gave boards, risk committees, and CFOs a framework they recognized from financial reporting, making climate risk a boardroom topic rather than a sustainability department sideshow.

Adoption was extraordinary by voluntary framework standards. By 2023, over 4,900 organizations across 100+ countries had expressed support for TCFD, including the world's largest banks, asset managers, insurers, and corporations. More importantly, governments began mandating TCFD-aligned reporting: the UK was first (2022 for large companies and financial institutions), followed by Japan, New Zealand, Switzerland, Singapore, Hong Kong, and others. This regulatory cascade demonstrated that a well-designed voluntary framework could catalyze mandatory disclosure within five years.

TCFD's concept of transition risk—the financial exposure from the shift to a lower-carbon economy through policy, technology, market, and reputation channels—gave companies a vocabulary for risks that didn't fit traditional hazard models. When a fossil fuel company assesses stranded asset risk under a 1.5°C scenario, it's performing TCFD-style analysis. When a bank evaluates its loan book's exposure to carbon-intensive sectors, it's using TCFD's financial sector supplemental guidance. These practices are now embedded in prudential regulation by central banks and financial supervisors worldwide.

The TCFD's disbandment doesn't diminish its relevance—it signals mission completion. The ISSB's IFRS S2 fully incorporates TCFD's four pillars, its scenario analysis expectations, and its distinction between physical and transition risks. Companies that invested in TCFD compliance have a direct path to ISSB readiness. Those that haven't are now building TCFD-equivalent capabilities under mandatory frameworks with shorter timelines and harder enforcement.

How It Works / Key Components

TCFD's four pillars structure all downstream climate disclosure frameworks. Governance requires disclosure of board oversight and management's role in assessing and managing climate-related risks and opportunities. Strategy requires description of identified climate risks and opportunities, their impact on business, strategy, and financial planning, and the resilience of strategy under different climate scenarios. Risk Management requires disclosure of processes for identifying, assessing, and managing climate risks and how these integrate with overall risk management. Metrics and Targets requires disclosure of metrics used to assess climate risks, GHG emissions (Scope 1, 2, and 3), and targets.

Scenario analysis was TCFD's most innovative—and challenging—recommendation. Companies were asked to describe the resilience of their strategy under different climate-related scenarios, including a 2°C or lower scenario. This requires quantifying how physical risks (extreme weather, sea level rise) and transition risks (carbon pricing, technology disruption, demand shifts) affect the business under multiple futures. Most early TCFD reports treated scenario analysis qualitatively; the ISSB and regulators now push for quantitative scenario analysis with disclosed assumptions and financial impacts.

TCFD distinguished between two categories of climate risk. Physical risks include acute events (storms, floods, wildfires) and chronic shifts (sea level rise, temperature increases, precipitation changes). Transition risks include policy and legal (carbon pricing, emissions regulations), technology (clean energy disruption, stranded assets), market (shifting demand, commodity prices), and reputation (consumer preferences, stakeholder activism). This taxonomy remains the standard classification used by risk managers, insurers, and regulators for climate risk assessment.

TCFD also published sector-specific supplemental guidance for financial institutions (banks, insurers, asset managers, asset owners), energy companies, transportation, materials and buildings, and agriculture/food/forest products. This guidance identified industry-specific metrics and analytical approaches, anticipating the sector-specific reporting requirements now being developed under ISSB and ESRS.

Council Fire's Approach

Council Fire built its climate risk advisory practice on the TCFD framework and continues to use its four-pillar structure as the organizing architecture for climate disclosure programs. We help clients transition from TCFD-aligned voluntary reporting to mandatory ISSB and ESRS compliance, ensuring that existing TCFD investments are fully leveraged while filling the gaps in scenario analysis depth, Scope 3 measurement, and transition plan specificity that mandatory standards require.

Frequently Asked Questions

Is TCFD still relevant now that it's been disbanded?

Absolutely. TCFD wasn't discontinued because it failed—it was disbanded because it succeeded. Its framework is embedded in ISSB IFRS S2, EU ESRS E1, UK Sustainability Disclosure Standards, and dozens of national regulations. Companies still commonly refer to "TCFD-aligned" reporting, and investors still evaluate climate disclosures against the TCFD pillars. The practical requirements haven't changed; they've been formalized and strengthened. Any company that mastered TCFD has a strong foundation for mandatory climate disclosure compliance.

What's the most common weakness in TCFD-aligned reports?

Scenario analysis consistently ranks as the weakest pillar. A 2023 TCFD status report found that while 60%+ of companies disclosed governance and risk management information, fewer than 30% provided quantitative scenario analysis with disclosed financial impacts. Many companies described scenarios in generic terms without connecting them to specific financial implications for their business. The ISSB has responded by requiring more prescriptive scenario analysis under IFRS S2, including mandatory consideration of a Paris-aligned scenario with quantified effects on financial position and performance.

How do I transition from TCFD reporting to ISSB compliance?

Start by mapping your existing TCFD disclosures against IFRS S2's specific requirements—the structural alignment is high, but IFRS S2 adds granularity in several areas. Key gaps to address include: quantitative (not just qualitative) scenario analysis, mandatory Scope 3 emissions with GHG Protocol categorization, explicit transition plan disclosures with milestones and progress metrics, connectivity between climate disclosures and financial statements, and industry-specific metrics derived from SASB standards. Companies with mature TCFD programs typically need 6–12 months of focused work to achieve ISSB readiness; those with basic TCFD compliance need 12–24 months.