What was the TCFD, and does it still matter?

‍Quick Answer: The Task Force on Climate-related Financial Disclosures (TCFD) was an international framework established in 2015 by the Financial Stability Board (FSB) to help organisations disclose climate-related financial risks and opportunities in a consistent, comparable way. It structured reporting around four pillars: Governance, Strategy, Risk Management, and Metrics and Targets. The TCFD's work was formally completed in October 2023, with its recommendations absorbed into the ISSB's IFRS S2 standard, which now serves as the global baseline for climate-related financial disclosures.

What is the Task Force on Climate-related Financial Disclosures (TCFD)?

The Task Force on Climate-related Financial Disclosures (TCFD) was an initiative created by the Financial Stability Board to give investors, lenders, and insurers consistent, decision-useful information about how organisations are exposed to climate-related risks and opportunities. Before TCFD, climate disclosures varied so widely between companies that meaningful comparison was almost impossible.

The FSB established the task force in 2015, and it published its final recommendations in 2017. Those recommendations quickly became the dominant global reference point for climate-related financial reporting, with over 1,700 organisations signing up as supporters and approximately 60% of the world's 100 largest public companies either endorsing or reporting against the framework (TCFD Status Report, 2022).

The Financial Stability Board formally disbanded the task force in October 2023, having announced in July 2023 that its work was complete. This was not the end of TCFD-aligned reporting. It was the beginning of a new phase, in which those recommendations became the foundation of binding international standards.

The four pillars of the TCFD framework

The TCFD framework organised climate-related disclosures around four core pillars. Each pillar addresses a distinct aspect of how climate change affects an organisation's operations and finances.

Governance: How the organisation's board and senior management oversee climate-related risks and opportunities. This includes board-level accountability and the processes used to inform strategic decisions.

Strategy: The actual and potential impacts of climate-related risks and opportunities on the business, its strategy, and financial planning. Organisations should describe how their strategy holds up under different climate scenarios, including a scenario consistent with a 1.5°C or 2°C warming pathway.

Risk Management: How the organisation identifies, assesses, and manages climate-related risks, and how those processes integrate with overall risk management.

Metrics and Targets: The specific metrics and targets used to measure and manage climate-related risks and opportunities, including greenhouse gas emissions across Scopes 1, 2, and 3.

Within these four pillars, the TCFD set out 11 recommended disclosures. The TCFD designed these to appear in mainstream financial filings rather than standalone sustainability reports, a deliberate choice to make climate risk visible to financial decision-makers.

Physical risks and transition risks: the two categories of climate-related financial risk

A central contribution of the TCFD framework was giving organisations a clear vocabulary for the types of climate risk they face.

Physical risks stem from the direct effects of climate change. These split into acute risks (extreme weather events such as floods, storms, and wildfires) and chronic risks (longer-term shifts such as rising sea levels, changing precipitation patterns, and sustained temperature increases). Physical risks can affect assets, supply chains, and operational continuity.

Transition risks arise from the shift to a lower-carbon economy. These include policy and regulatory changes (such as carbon pricing or emissions caps), shifts in technology (such as the decline of fossil fuel infrastructure), changes in market demand, and reputational exposure for organisations seen as slow to act.

Understanding which category of risk is most material to a given business is the starting point for meaningful TCFD-aligned disclosure. A manufacturing company with energy-intensive operations faces a different risk profile from a financial institution with exposure to carbon-intensive assets.

What is scenario analysis, and why does it matter for TCFD reporting?

Scenario analysis is the element of TCFD reporting that organisations consistently find most challenging, and it is also the element most commonly treated superficially in existing guidance.

Under the Strategy pillar, organisations must assess the resilience of their strategy against at least two climate scenarios: one aligned with a low-carbon transition (typically a 1.5°C or 2°C pathway) and one representing a higher-warming, physical-risk-heavy future (often a 3°C-4°C pathway). The purpose is not to predict the future but to test whether the business model holds up under materially different conditions.

In practice, this means identifying which assets, revenue streams, or cost structures are most exposed under each scenario, and then describing what the organisation would do differently as a result. Qualitative descriptions are a starting point, but regulators and investors increasingly expect quantified estimates of financial impact where these are feasible.

This is where many organisations struggle. Translating climate scenarios into financial modelling requires data, assumptions, and methodological choices that most companies have not previously had to make. The TCFD's own status reports acknowledged that quantitative disclosure of physical risk impacts remained far less common than qualitative description, and that this was a gap the framework had not fully closed.

Where does TCFD stand now, and what replaced it?

The TCFD's recommendations did not disappear when the task force disbanded. The IFRS Foundation integrated them into the International Sustainability Standards Board (ISSB) standards, specifically IFRS S2 Climate-related Disclosures, published in June 2023. IFRS S2 builds directly on the TCFD's four-pillar structure and 11 recommended disclosures, making it the effective successor for jurisdictions that adopt ISSB standards.

Several jurisdictions had already moved to make TCFD-aligned reporting mandatory before the transition to ISSB:

• United Kingdom: Mandatory TCFD-aligned disclosures for listed companies, large private companies, banks, and insurers came into effect from 2022.
• New Zealand: Mandatory climate-related disclosures for large financial institutions, listed issuers, and insurers took effect from 2023.
• Singapore, Hong Kong, and Japan each introduced mandatory or comply-or-explain TCFD-aligned requirements for listed companies on similar timelines.
• European Union: The Corporate Sustainability Reporting Directive (CSRD) incorporates TCFD principles within its broader sustainability reporting requirements for large companies.

For organisations in the supply chains of large TCFD-reporting entities, the practical implication is that pressure to disclose climate-related information flows downstream. Large companies increasingly ask suppliers to provide Scope 3 emissions data and evidence of climate risk management, even if those suppliers are not themselves subject to mandatory disclosure requirements.

Why TCFD matters for smaller organisations

Most TCFD guidance addresses large listed companies. But the framework's influence extends well beyond that audience.

Smaller organisations face TCFD-related expectations through three main routes. First, procurement: large companies reporting under TCFD or IFRS S2 need Scope 3 data from their suppliers, which means supplier questionnaires and requests for verified emissions figures are becoming standard. Second, finance: lenders and investors increasingly apply climate risk criteria informed by TCFD principles when making credit and investment decisions. Third, regulation: as mandatory disclosure thresholds lower over time, more organisations will fall within scope directly.

The starting point for any organisation responding to these pressures is an accurate, full-scope carbon footprint. Without reliable Scope 1, 2, and 3 emissions data, it is not possible to populate the Metrics and Targets pillar meaningfully, or to model how emissions reduction plans hold up under different climate scenarios. Seedling builds its carbon accounting software and expert support around exactly this need: producing GHG Protocol-aligned footprints with the data quality required to support credible climate-related disclosures, without the overhead of an enterprise implementation.

Organisations that build the data foundations now are better placed to meet disclosure expectations as they evolve, rather than having to retrofit their reporting under pressure. The next development to watch is assurance: as IFRS S2 adoption spreads, regulators and investors are increasingly pushing for independent verification of the emissions data and scenario assumptions that underpin climate-related disclosures, and data quality will determine how credible those disclosures prove to be.