Climate reporting: Comparing disclosure regimes with TCFD

Global climate reporting is evolving fast. The proposed Securities and Exchange Commission (SEC) rules to standardize climate-related disclosures for investors in the U.S. and the EU Taxonomy for sustainable activities build on the foundations laid by the international Financial Stability Board (FSB)’s Task Force on Climate-related Financial Disclosures (TCFD). Alongside this, international climate reporting standards continue to advance with the formation of the International Standards Sustainability Board (ISSB) towards the end of 2021, itself part of the Corporate Sustainability Reporting Directive (CSRD), an EU environmental, social and governance (ESG) standard passed late in 2022 to make corporate sustainability reporting more widespread, consistent and standardized.

Given the breadth of climate disclosure regimes, if you’re striving to comply and meet the expectations of shareholders and investors unpicking your climate reporting priorities is not always straightforward. This can be particularly true if you’re thinking beyond compliance and using climate reporting as a catalyst for strategic change.

We’ve analysed the three key climate reporting frameworks: TCFD, the SEC climate proposal and the EU Taxonomy, in addition to ISSB and the related CSRD, to create a comparative table.

WTW’s Climate Reporting Comparative Table is designed to help you quickly identify the main reporting criteria, crossovers between climate reporting regimes and their key departures, while also indicating where one framework refines or evolves the principles established by another. The table also compares where the different climate reporting requirements apply, to which institutions and to what extent the climate disclosure rules in question are voluntary or mandatory, amongst other comparative criteria.

Climate Reporting Comparative Table: Headline takeaways

The headline implications from our climate reporting comparative exercise include:

• All frameworks differ but all begin from the foundations established by TCFD, indicating if you’re early in your climate journey, you should prioritise TCFD reporting compliance.
• EU Taxonomy and CSRD endorse TCFD but have subtle differences and go further in many places.
• Rules that require ‘do no significant harm’ element, including to third parties, have wide-ranging implications for your organization and its supply partners; likewise regimes that consider not only your organization’s carbon emission, but also third parties’.
• You need to go beyond demonstrating generalizable ‘climate action’. Be prepared to evidence how your climate measures are sustainable to meet climate reporting requirements under any regime. Where a climate reporting framework distinguishes between adaptation and mitigation, you may need to interrogate your climate adaptation steps more robustly to ensure they’re sustainable over the longer term.
• You need to connect sustainability strategy with risk management. This is true whether you’re complying with TCFD, EU Taxonomy/CSRD, or the SEC climate proposal. Whatever the compliance framework, you need to recognize climate risk as a financial risk that requires appropriately financing and managing.
• To define your climate reporting path, you may need support to distil your priority actions arising from the differing climate reporting frameworks.

Bear in mind that climate regulation is a fast-moving area. We have created and shared this information on the basis of it being our understanding of what was correct at the time of writing. This includes where we have responded with a ‘Likely’ assessment of any of the comparative criteria.

While it’s possible that in the near future we could see ISSB or another framework take greater prominence as global climate reporting standards mature, as Harvard Law School Forum on Corporate Governance points out in its 2022 paper on navigating the broader ESG landscape, TCFD is one of the most broadly used sustainability reporting frameworks, endorsed by more than 2,600 organizations worldwide. TCFD, the paper argues, provides a point of continuity with voluntary reporting and wider international ESG reporting frameworks, indicating that even if TCFD’s dominance fades, its DNA is likely to be coded into any subsequent set of global requirements.

Regardless of future change in climate reporting, the overall message is clear: you will need to act decisively and urgently on climate both to comply with the growing body of regulation and to meet the expectations of investors, customers and other stakeholders.

If you’re in any doubt about your climate reporting obligations, or want to know the latest updates as climate compliance regimes evolve, do get in touch.

To access WTW’s Climate Reporting Comparative Table, please fill in the short form on this page.

Contact

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Torolf Hamm

Senior Director,
Physical Climate Risk, Climate Practice,
WTW

email Email phone +44 20 3124 8281

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