The Task Force on Climate-related Financial Disclosures has just made its recommendations today (see here). The idea is that these will be the disclosures all companies will need to make in their financial reports.
Amongst the recommendations is one on ‘Scenario Analysis’
“One of the Task Force’s key recommended disclosures is related to the disclosure of potential impacts of climate-related risks and opportunities on an organization’s businesses, strategies, and financial planning under different potential future states (scenarios), including a 2°Celsius scenario. Disclosure of how organizations analyze different climate-related scenarios and the considerations associated with the individual scenarios is a key step to better understanding the potential financial implications of climate change on an organization. Over time, the Task Force would expect to see more quantitative analyses in disclosures, including the underlying assumptions associated with the climate-related scenarios used.”
Financial Markets and Transparency One of the essential functions of financial markets is to price risk to support informed, efficient capital-allocation decisions. Accurate and timely disclosure of current and past operating and financial results is fundamental to this function, but it is increasingly important to also understand the governance and risk management context in which financial results are achieved.