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Climate Risk Disclosure Task Group responds to Task Force for Climate-Related Financial Disclosures consultation

News  |  09 September, 2021  |  Reading time: 3 minutes

In June and July 2021, the international Task Force for Climate-Related Financial Disclosures (TCFD) held a public consultation on two of their guidance documents: ‘Proposed Guidance on Climate-related Metrics, Targets, and Transition Plans’ and the associated ‘Measuring Portfolio Alignment: Technical Supplement’.

The Space4Climate (S4C) Climate Risk Disclosure (CRD) Task Group were interested in the climate-related metrics presented by the TCFD and submitted a response to the consultation. It was hoped that these metrics would allow S4C to identify areas where Earth Observation (EO) data could be used to support production of the proposed metrics.

“After reading the consultation documents, we felt that the current guidance is rather weak as it provides almost no technical details that companies could use to make informed decisions on how best to disclose these metrics.” Dr Amanda Hall, chair of the S4C CRD Task Group

In the consultation documents the TCFD broadly defined seven cross-industry, climate-related metrics. Those considered of interest to the CRD Task Group and S4C more widely were:

  • (1) Greenhouse Gas (GHG) emissions (Absolute Scope 1, Scope 2, and relevant, material categories of Scope 3 emissions, as well as carbon intensity);
  • (3) Proportion of assets and/or operating, investing, or financing activities materially exposed to physical risks, based on key categories of commonly accepted risks.

Improved technical guidance needed to calculate emissions metrics

It is the opinion of the CRD Task Group that climate-related disclosures should aim to be consistent in their approaches, using transparent metrics that can be compared in order to provide robust information on the emissions organisations disclose and on the physical impacts changes in climate can have on organisation operations. However, the broad nature of the metrics in the consultation documents resulted in very little specific guidance being given and next to no information on what datasets should be used or reliable sources of quality data. As it is assumed that most financial institutions will not be familiar with the data available for use in calculating metrics related to GHG emissions and physical risks, improved technical guidance is required.

More details need on sources of data and physical risks

The data supply chain is far more advanced than the metrics currently suggest in terms of EO and climate data. EO is a robust, often freely available, source of data suitable to support the proposed metrics related to GHG emissions and physical risks.

The S4C Task Group also proposed that the TCFD guidance on metrics include details on sources of information. For example, the metrics documentation only mentioned examples of physical risks in passing, with no information provided about the specific physical risks that should be included in disclosures and no information on the different possible data sources, e.g. ground observations, satellites, reanalysis data, climate models, etc., nor their traceability.

The consultation response was compiled by Dr Amanda Hall, Chair of the CRD Task Group, and Briony Turner, Climate Services Development Manager, with support from Erica Webb, CRD Task Group secretary. Detailed input was provided by Jorge Guira and Chris Hilson, University of Reading and Christophe Christiaen, Satellite Applications Catapult. The response was circulated to all CRD Task Group participants and the whole S4C group for comment.

It is hoped that the TCFD will take the group’s consultation responses on board when updating the Proposed Guidance on Climate-related Metrics, Targets, and Transition Plans document to aid companies in producing high quality climate-related financial disclosures.

The consultation closed on July 18, 2021.