What Is TCFD?

The Task Force on Climate-related Financial Disclosures (TCFD) is a framework for companies to disclose climate-related risks and opportunities to investors and other stakeholders. Established by the Financial Stability Board in 2015 and chaired by Michael Bloomberg, TCFD developed recommendations that have become the global baseline for climate risk disclosure.

TCFD's premise is that climate change poses material financial risks that investors need to understand and price. Physical risks—from extreme weather, sea level rise, resource scarcity—threaten asset values and operations. Transition risks—from policy changes, technology shifts, market dynamics—affect business models and competitiveness. Companies that don't disclose these risks leave investors unable to make informed decisions.

The framework organizes disclosure around four pillars: Governance, Strategy, Risk Management, and Metrics and Targets. Within each pillar, TCFD specifies recommended disclosures that help investors understand how companies identify, assess, manage, and monitor climate-related risks and opportunities.

TCFD has achieved remarkable adoption. Originally voluntary, TCFD-aligned disclosure is now mandatory in multiple jurisdictions including the UK, EU, Japan, Singapore, Hong Kong, New Zealand, and Switzerland. TCFD principles underpin ISSB standards and influence SEC climate rules. Understanding TCFD is essential for navigating the evolving climate disclosure landscape.

Why TCFD Matters for Financial Risk Management

TCFD transformed climate from an environmental issue to a financial risk management concern. Its framing—climate as material financial risk requiring disclosure to capital markets—changed how companies, investors, and regulators approach climate.

Investors demand TCFD-aligned information. Asset managers representing trillions of dollars request TCFD disclosures from portfolio companies. Climate risk is investment risk; investors need information to manage it. Companies that don't provide TCFD-aligned disclosure face investor pressure and potential capital access constraints.

Regulators are mandating TCFD. What began as voluntary recommendations is becoming legal requirement. UK premium-listed companies must disclose against TCFD. EU CSRD incorporates TCFD-aligned climate disclosure. Other jurisdictions follow. TCFD knowledge is compliance knowledge.

Scenario analysis reveals strategic exposure. TCFD recommends climate scenario analysis—exploring how different climate futures affect business strategy and financial performance. This analytical discipline reveals exposures that conventional risk assessment misses and informs strategic planning.

The framework applies across sectors. TCFD provides sector-specific guidance for financial services, energy, transportation, materials, and agriculture. Guidance helps companies identify climate risks most relevant to their industries and report in ways investors find useful.

TCFD builds organizational capability. Implementing TCFD requires governance attention, cross-functional collaboration, data infrastructure, and analytical capability. These capabilities serve companies beyond disclosure—informing strategy, risk management, and capital allocation.

How TCFD Implementation Works

1. Governance Establish board and management oversight of climate:

• Board oversight: How does the board oversee climate-related risks and opportunities?

• Management role: What is management's role in assessing and managing climate risks?

• Disclosure: Describe governance structures for climate in disclosure

Governance establishes accountability for climate risk management.

2. Strategy Assess and disclose climate impacts on business:

• Risk and opportunity identification: What climate-related risks and opportunities has the organization identified?

• Business impact: How do these affect strategy, business model, and financial planning?

• Scenario analysis: How resilient is strategy under different climate scenarios (including 2°C or below)?

• Disclosure: Describe actual and potential impacts over short, medium, and long term

Strategy disclosure reveals how climate affects business fundamentals.

3. Risk Management Describe processes for managing climate risk:

• Identification and assessment: How does the organization identify and assess climate-related risks?

• Management processes: How are climate risks managed?

• Integration: How are climate risk processes integrated with overall risk management?

• Disclosure: Describe risk management processes

Risk management shows how companies respond to identified risks.

4. Metrics and Targets Quantify climate performance:

• Metrics: What metrics does the organization use to assess climate risks and opportunities?

• GHG emissions: Disclose Scope 1, Scope 2, and (if material) Scope 3 emissions

• Targets: What targets does the organization use, and what is performance against them?

• Disclosure: Provide metrics used, emissions data, and target progress

Metrics enable comparison and accountability.

5. Scenario Analysis (Cross-Cutting) Explore strategic resilience:

• Select scenarios: Choose climate scenarios spanning physical and transition risk pathways

• Assess impacts: Analyze how scenarios affect business across time horizons

• Evaluate resilience: Assess strategic robustness across scenarios

• Inform strategy: Use insights to enhance strategic planning

• Disclose: Describe scenarios used and strategic implications

Scenario analysis is the distinctive analytical contribution TCFD brings.

TCFD vs. Related Frameworks

Common Misconceptions About TCFD

"TCFD is voluntary." TCFD recommendations were voluntary when released; they're increasingly mandatory. Multiple jurisdictions require TCFD-aligned disclosure. Even where not legally required, investor expectations make TCFD disclosure practically necessary for many companies.

"TCFD is just emissions reporting." Emissions metrics are one component. TCFD emphasizes governance, strategy, and risk management—how companies understand and respond to climate risk. Emissions data without strategic context misses TCFD's point.

"Scenario analysis is too speculative to be useful." Scenario analysis doesn't predict the future; it explores possibilities and tests strategic resilience. Companies use scenarios across strategy and risk management. Climate scenario analysis applies established practice to climate-specific questions.

"Our sector isn't exposed to climate risk." Every sector faces some combination of physical and transition risks. Financial services face portfolio exposure. Technology faces supply chain and data center risks. Retail faces consumer and supply chain shifts. Climate risk is pervasive.

"TCFD is being replaced by ISSB." TCFD disbanded in 2023 because ISSB standards accomplished what TCFD intended—establishing global baseline climate disclosure standards. ISSB continues TCFD's work; companies implementing TCFD are prepared for ISSB.

When TCFD May Not Be the Starting Point

If your organization lacks basic emissions data—hasn't conducted GHG inventory, doesn't know Scope 1 and 2 emissions—build that foundation before attempting comprehensive TCFD disclosure. Data infrastructure enables disclosure.

For very small companies with limited climate exposure and no investor, regulatory, or customer pressure for disclosure, TCFD implementation may be disproportionate to benefit. Focus resources where they create most value.

If climate is genuinely immaterial to your business—rare but possible—TCFD disclosure adds little. However, careful analysis often reveals exposure that assumption dismisses.

How TCFD Connects to Broader Systems

TCFD connects climate and finance. It established the expectation that climate risk belongs in financial disclosure, investor relations, and capital market decision-making. This connection opened climate to financial system influence—and responsibility.

Corporate governance incorporates TCFD through board oversight requirements. Boards must demonstrate climate competence and attention. TCFD brings climate into governance structures that ensure strategic importance.

Risk management extends to include TCFD-specified climate risk processes. Enterprise risk management frameworks increasingly incorporate climate as a risk category, with TCFD providing the structure for assessment and disclosure.

Strategic planning incorporates TCFD scenario analysis. Climate futures shape strategy; scenario analysis reveals how. TCFD makes climate-informed strategy visible through disclosure.

Investor relations centers TCFD information in climate-focused engagement. Earnings calls, investor meetings, and shareholder communications increasingly address TCFD-aligned topics. IR teams need TCFD fluency.

Regulatory compliance requires TCFD knowledge as jurisdictions mandate aligned disclosure. Understanding TCFD prepares companies for requirements wherever they operate.

Related Definitions

→ What Is CSRD? → What Is TNFD? → What Is SEC Climate Disclosure? → What Is Climate Risk Assessment? → What Is Scope 3 Emissions?

3. TNFD (Taskforce on Nature-related Financial Disclosures)

What Is TNFD?

The Taskforce on Nature-related Financial Disclosures (TNFD) is a framework for organizations to report and act on nature-related risks, opportunities, and impacts. Launched in 2021 and releasing final recommendations in September 2023, TNFD extends climate disclosure approaches to the broader crisis of biodiversity loss and ecosystem degradation.

TNFD recognizes that nature underpins economic activity. Businesses depend on ecosystem services—pollination, water purification, climate regulation, genetic resources—worth trillions of dollars annually. Yet nature is declining at unprecedented rates, creating risks that financial systems have largely ignored. TNFD makes nature-related risks visible and manageable.

The framework mirrors TCFD's structure—organizing disclosure around Governance, Strategy, Risk and Impact Management, and Metrics and Targets. This parallel structure enables companies already implementing TCFD to extend their approach to nature. It also enables integrated assessment of climate and nature risks, which are deeply interconnected.

TNFD introduces the LEAP approach—Locate, Evaluate, Assess, Prepare—guiding organizations through identifying nature-related dependencies and impacts across their value chains. This structured methodology helps companies understand where and how they interact with nature.

Why TNFD Matters for Business and Investment

Nature loss poses material risks that most organizations haven't assessed or disclosed. TNFD provides the framework for understanding and communicating these risks before they materialize as financial losses.

Nature dependencies create business risk. Over half of global GDP—approximately $44 trillion—depends moderately or highly on nature and its services. Companies relying on agricultural inputs, water resources, stable climates, or natural materials face risk when ecosystems degrade. Understanding nature dependencies reveals vulnerabilities.

Regulatory attention is increasing. Following TNFD's release, adoption is accelerating. The UK, Japan, Singapore, and other jurisdictions are signaling TNFD-aligned disclosure expectations. EU CSRD already requires nature-related disclosure through ESRS E4 (biodiversity). Early movers gain advantage.

Investors are incorporating nature risk. Major asset managers and owners—members of the Nature Action 100 initiative—are engaging companies on nature-related risks. Investor questionnaires increasingly address biodiversity. Companies unable to respond face scrutiny.

Nature and climate are interconnected. Deforestation drives emissions; ecosystem degradation reduces carbon absorption; climate change accelerates biodiversity loss. Organizations can't address climate comprehensively without addressing nature. TNFD enables integrated assessment.

Nature-positive opportunities exist. TNFD highlights opportunities alongside risks. Nature-based solutions, regenerative practices, and ecosystem restoration create business value while addressing nature loss. Understanding nature dynamics reveals opportunities competitors miss.

How TNFD Implementation Works

1. The LEAP Approach: Scoping Assessment

Locate your interface with nature:

• Where are your direct operations geographically?

• Where does your value chain (upstream and downstream) interface with nature?

• Which locations are in or near sensitive areas (protected areas, key biodiversity areas, water-stressed regions)?

• What biomes and ecosystems do your activities affect?

Evaluate dependencies and impacts:

• What ecosystem services do your operations depend on (water, pollination, climate regulation, raw materials)?

• What impacts do your activities have on nature (land use change, pollution, resource extraction, invasive species)?

• How significant are these dependencies and impacts?

Assess risks and opportunities:

• What nature-related risks emerge from your dependencies and impacts?

• What opportunities exist from nature-positive approaches?

• How material are these risks and opportunities financially?

Prepare to respond and report:

• How should strategy respond to identified risks and opportunities?

• What targets and metrics will track performance?

• How will findings be disclosed?

2. Governance Disclosure Describe oversight of nature-related issues:

• Board oversight of nature-related risks, opportunities, and impacts

• Management's role in assessment and response

• Integration with existing governance structures

3. Strategy Disclosure Explain how nature affects strategy:

• Nature-related dependencies, impacts, risks, and opportunities identified

• Effects on business model, strategy, and financial planning

• Resilience of strategy considering nature-related scenarios

• Location-specific considerations for priority areas

4. Risk and Impact Management Disclosure Describe management processes:

• Processes for identifying and assessing nature-related risks and impacts

• Processes for managing nature-related risks and impacts

• Integration with overall risk management

5. Metrics and Targets Disclosure Quantify performance:

• Metrics used to assess nature-related risks, opportunities, impacts, and dependencies

• Metrics on impacts on nature (aligned with impact drivers)

• Targets used and performance against them

• Location-specific metrics for priority areas

TNFD vs. Related Frameworks

Common Misconceptions About TNFD

"Nature risk only affects land-intensive industries." Every industry depends on ecosystem services and affects nature through value chains. Financial services face portfolio exposure. Technology depends on minerals extracted from sensitive ecosystems. Consumer goods rely on agricultural supply chains. Nature risk is pervasive.

"We addressed nature by reporting climate." Climate and nature are related but distinct. Climate disclosure doesn't cover biodiversity loss, ecosystem degradation, water impacts, or many nature-related dependencies and impacts. TNFD covers issues climate disclosure misses.

"Nature is too complex to assess." Nature is complex, but TNFD's LEAP approach provides structured methodology. Companies don't need comprehensive ecological assessment—they need to understand material nature-related dependencies, impacts, risks, and opportunities. TNFD makes this tractable.

"TNFD is years away from maturity." Final TNFD recommendations are published and adoption is accelerating. Regulatory incorporation is already occurring. Waiting for the framework to "mature" means falling behind companies and jurisdictions acting now.

"Our locations aren't near sensitive ecosystems." Value chain activities—suppliers, raw material sources, product distribution—may occur in sensitive locations even if direct operations don't. TNFD's LEAP approach examines value chain geography, not just operational footprint.

When TNFD May Not Be Immediate Priority

If your organization hasn't implemented TCFD and faces immediate climate disclosure requirements, establishing climate disclosure may precede nature-focused TNFD implementation. Build on TCFD capability for TNFD.

For companies with minimal value chain complexity—simple supply chains, limited geographic spread—TNFD assessment may be straightforward and proportionate LEAP scoping appropriate.

If nature dependencies and impacts are genuinely immaterial after careful assessment—rare for most businesses—full TNFD implementation may be disproportionate. However, assumptions of immateriality deserve scrutiny.

How TNFD Connects to Broader Systems

TNFD connects to climate strategy through nature-climate linkages. Deforestation, land degradation, and ocean acidification affect climate; climate change accelerates nature loss. Integrated TCFD-TNFD approaches address both dimensions.

Supply chain management incorporates TNFD through geographic assessment of nature-related risks and impacts across value chains. Commodity sourcing, supplier locations, and land use practices all enter sustainability scope through TNFD.

Corporate sustainability strategy extends from climate-focused to nature-inclusive through TNFD. Sustainability teams need nature-related competencies alongside climate capabilities.

Investment analysis incorporates nature risk through TNFD-aligned disclosure. Asset managers assess portfolio exposure to nature-related risks; company disclosure enables this analysis.

Regulatory compliance benefits from TNFD adoption as jurisdictions incorporate nature disclosure requirements. Early TNFD implementation prepares companies for regulatory evolution.

Risk management expands to include nature alongside climate in enterprise risk frameworks. TNFD provides structure for assessing and managing nature-related risks systematically.

Related Definitions

→ What Is CSRD?

→ What Is Nature-Based Solutions?

→ What Is Climate Risk Assessment?

→ What Is Double Materiality?