Following the financial crisis in the late 2000’s, the G20 established the Financial Stability Board (FSB) to identify and mitigate threats to the global financial system. In 2015, the FSB, led by New York City’s former Mayor, Michael Bloomberg and comprised of members from global banking institutions, insurance companies, institutional investors, industrial and consumer products companies and experts on financial accounting and public disclosure, created the Task Force on Climate-related Financial Disclosures (TCFD). The Task Force was developed in direct response to:
• A belief that climate change represents a growing systemic threat
• A lack of high-quality, consistent financial information related to the potential risks and opportunities associated with climate change
• A growing need for transparency in company valuation and the ability to assess the risks organisations are facing
After numerous rounds of input, the TCFD published a set of recommendations in June 2017 to “help firms understand what financial markets want from disclosure in order to measure and respond to climate change risks and encourage firms to align their disclosures with investors’ needs.” These recommendations focus on four core operational elements: governance, strategy, risk management and metrics and targets. They are designed to be implemented across all sectors to varying degrees.
In recognition of the breadth of climate change reporting already occurring, TCFD allows for organisations using existing disclosure frameworks to apply the TCFD guidance within that framework as they become accustomed to the more rigorous reporting requirements. Therefore, companies already reporting and disclosing information under other frameworks (e.g., CDP Climate Change) may be in a better position to implement the Task Force’s recommendations within the first year. The TCFD anticipates that reporting will evolve over time as expectations rise and quality and consistency in reporting continue to increase.
Key Changes to the CDP 2018 Climate Change Questionnaire
The most significant change for 2018 is that CDP has expanded sector-specific reporting by issuing separate questionnaires for the following sectors:
• Agriculture – Agricultural commodities; Food, beverage & tobacco; Paper & forestry
• Energy – Coal; Electric utilities; Oil & gas
• Materials – Cement; Chemicals; Metals & mining; Steel
• Transport – Transport services; Transport vehicle manufacturers
Companies outside of these sectors will respond to the general CDP 2018 Climate Change questionnaire. To align with the TCFD recommendations and to allow for broader reporting of sustainability metrics, CDP has added new questions to the 2018 general questionnaire and amended others. Key changes include:
• More detailed requirements on risk identification and management
• New requirements for climate scenario analysis
• Required reporting on additional climate change related targets (e.g., waste, renewable energy purchases, energy)
• Scope 1 reporting now required to detail Greenhouse Gas (GHG) type and Global Warming Potential (GWP)
Additionally, CDP’s updated scoring methodology was released in March 2018. Alongside this, CDP also published a detailed reporting guidance document in which provides additional details on these changes.
Given these changes, the Sustainability and Climate Change team at WSP recommend developing a plan to address the TCFD recommendations and other changes in the CDP Climate Change questionnaire. These plans should focus on:
(1) Enhancing your organisation’s understanding of climate risks and opportunities
(2) Building climate resilience
(3) Improving your 2018 CDP Climate Change response and other corporate disclosures
(4) Preparing for potential internal or external requests for information on your organisation’s approach to implementing the TCFD recommendations
For guidance on how to respond to the CDP 2018 Climate Change questionnaire, including scoring information for the new and amended questions outlined above, look out for our forthcoming white paper, Making the Most of CDP 2018.
This blog was written by James Tapson
James is a Senior Consultant in the Sustainability and Climate Change team, and has five years of experience supporting organisations overcome sustainability challenges and implement effective carbon management strategies. James has supported a wide range of organisations in quantifying, managing and disclosing their impacts on climate change and has practical experience of working within multidisciplinary project teams in helping to deliver tangible carbon reductions. He has significant experience in developing and implementing corporate sustainability programmes across multiple sectors, in the UK and internationally, and supports the delivery of the Airport Carbon Accreditation programme, where over 230 airports have gained recognition for their carbon management practices.