Climate Risk Disclosure: TCFD & SEC Requirements Guide

Climate risk disclosure has evolved from voluntary best practice to regulatory requirement. Understanding TCFD framework and SEC climate disclosure rules is essential for compliant financial reporting.

TCFD Framework Overview

The Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board in 2015 to improve climate-related financial reporting. Though the task force disbanded in October 2023, its framework remains the global standard, now monitored by the IFRS Foundation. To understand how TCFD compares to other frameworks, see our ESG Reporting Standards comparison guide.

🏛️ Governance

Disclose organization's governance around climate-related risks and opportunities

• Board oversight of climate issues
• Management's role in assessment
• Integration into governance structures

🎯 Strategy

Actual and potential impacts on business, strategy, and financial planning

• Short, medium, long-term risks
• Impact on business & strategy
• Scenario analysis

⚙️ Risk Management

How organization identifies, assesses, and manages climate risks

• Risk identification processes
• Assessment and prioritization
• Integration into overall risk management

📊 Metrics & Targets

Metrics and targets used to assess climate-related risks

• GHG emissions (Scope 1, 2, 3) - Learn how to measure your emissions
• Climate-related metrics
• Targets and performance

SEC Climate Disclosure Rule

The SEC finalized "The Enhancement and Standardization of Climate-Related Disclosures for Investors" on March 6, 2024. However, implementation was paused on April 4, 2024, pending legal challenges.

Current Status (2025)

While the rule is paused, companies should continue preparing for eventual implementation. Key requirements include:

Material climate risks aligned with TCFD guidelines
Process for identifying, assessing, and mitigating risks
Impacts on company finances over short, medium, long term
Governance structures for climate oversight

Implementation Timeline (If Rule Proceeds)

Large Accelerated Filers

Climate risk disclosures begin soonest, assurance requirements phased in over time

Accelerated Filers

Begin disclosures 1-2 years after large filers

Smaller Reporting Companies

Not expected to begin until 2028, assurance beginning 2030

Types of Climate Risks

Physical Risks

Acute: Event-driven (hurricanes, floods, wildfires)

Chronic: Long-term shifts (temperature, sea level, precipitation)

Impacts: Asset damage, supply chain disruption, operational challenges

Transition Risks

Policy: Carbon pricing, regulations

Technology: Low-carbon substitution

Market: Shifting demand, stigmatization

Reputation: Stakeholder perception

Best Practices for Disclosure

✓ Conduct scenario analysis: Model 2°C and 1.5°C warming scenarios aligned with Net Zero pathways
✓ Quantify when possible: Financial impacts, emissions data, targets
✓ Be specific about time horizons: Define short (0-3y), medium (3-10y), long (10y+)
✓ Link to financial statements: Show how climate impacts financials
✓ Explain methodology: Transparent about assumptions and limitations
✓ Seek assurance: Third-party verification enhances credibility

Resources

Though TCFD disbanded, materials remain available:

TCFD recommendations and guidance documents
Scenario analysis resources
Industry-specific supplemental guidance
Implementation examples and case studies

Monitoring now handled by IFRS Foundation's ISSB standards

Climate Risk Disclosure: TCFD and SEC Requirements Guide