What TCFD reporting actually involves

The Task Force on Climate-related Financial Disclosures (TCFD) developed a framework for companies to disclose material climate-related risks and opportunities in a consistent, comparable format for investors and other financial stakeholders. The framework organises disclosures across four pillars: governance (board and management oversight of climate risks), strategy (the actual and potential impacts of climate risks on business, strategy, and financial planning, using scenario analysis), risk management (how climate risks are identified, assessed, and managed), and metrics and targets (emissions data and climate-related performance targets). TCFD was formally disbanded in 2023 following the publication of IFRS S2, which builds on and supersedes TCFD recommendations.

Why it's harder in practice than it looks

Scenario analysis is the most demanding TCFD element for most companies

TCFD requires companies to assess their resilience to different climate scenarios and disclose how their strategy holds up under at least a 2C and a below 2C or 1.5C scenario. For most companies, this requires modelling specific financial impacts under different climate futures, a technically demanding exercise that goes far beyond qualitative narrative about potential risks. Companies that produce scenario analysis describing generic industry-level risks without connecting them to specific financial impacts on the company's own assets, costs, and revenues are not meeting the intent of the framework.

Governance disclosures require actual board-level climate oversight to exist

TCFD's governance pillar asks how the board oversees climate-related risks and opportunities. Companies where climate is genuinely discussed at board level, where the board has approved the climate strategy, and where board remuneration is linked to climate performance produce substantive disclosures. Companies where climate is managed below board level produce disclosures that describe processes that do not actually exist, which creates assurance risk and investor credibility problems.

Transition risks are materially different for each business and require sector-specific analysis

Transition risks, regulatory changes, technology shifts, market changes, and reputational factors arising from the shift to a low-carbon economy, vary enormously by sector, business model, and geographic exposure. Generic transition risk narratives that describe industry-level risks without assessing specific exposure for the company's actual operations, assets, and revenue streams are not meaningful disclosures. Credible transition risk analysis requires sector-specific expertise and financial modelling that most sustainability teams cannot deliver independently.

Physical risk assessment requires location-specific data and financial quantification

TCFD requires companies to assess physical risks, the impact of changing climate conditions on operations, assets, and supply chains. Meaningful physical risk assessment requires climate projection data at the location level of the company's assets and suppliers, not just global or regional averages. Translating physical risk exposure into financial impact estimates, the reduction in asset value, increase in operating costs, or revenue disruption from a specific hazard, requires actuarial or financial modelling expertise.

TCFD and IFRS S2 alignment requires careful management

Since IFRS S2 incorporates and supersedes TCFD, companies that have been producing TCFD-aligned disclosures must assess how IFRS S2's additional requirements, on Scope 3 disclosure, industry-specific metrics from SASB, and quantified transition plan disclosures, affect their existing reporting programme. Most companies will find gaps between their current TCFD disclosure and full IFRS S2 compliance.

What good looks like

A high-quality TCFD disclosure demonstrates actual board-level climate governance with specific meeting agendas and committee structures evidencing real oversight; strategy disclosures that connect specific climate risks and opportunities to the company's financial planning with quantified estimates where material; scenario analysis using at least two scenarios with documented assumptions and specific financial implications for the company's own business model; a risk management process that is genuinely integrated with enterprise risk management rather than parallel to it; and complete Scope 1, 2, and material Scope 3 emissions with an intensity metric and science-based targets. The disclosure is consistent with all other corporate communications and reviewed by an external assurance provider.

When to bring in external support

Scenario analysis, physical risk modelling, transition risk financial assessment, and TCFD-to-IFRS S2 gap analysis all require specialist expertise combining climate science, sector knowledge, and financial modelling. The stakes are high, TCFD disclosure quality is a primary lens through which institutional investors assess climate management quality, and poor disclosure directly affects cost of capital and investor engagement outcomes.

Leafr's network includes TCFD and IFRS S2 specialists who have delivered climate risk assessments and disclosure programmes for companies across financial services, real estate, manufacturing, and infrastructure, including clients such as Vodafone and Polestar. Engagements begin within 48 hours and are structured to deliver board-ready outputs within defined timelines.

Frequently asked questions

What is TCFD and is it still relevant after IFRS S2?

TCFD (Task Force on Climate-related Financial Disclosures) was an industry-led initiative that developed a globally adopted framework for climate risk disclosure. It was formally disbanded in October 2023 following the publication of IFRS S2, which the ISSB designed to incorporate and supersede TCFD recommendations. TCFD remains relevant in two respects: it is still referenced in mandatory disclosure requirements in several jurisdictions that have not yet formally adopted IFRS S2, and companies' TCFD programmes provide the foundation for transitioning to IFRS S2 compliance.

What are the four pillars of TCFD?

The four pillars are governance (how the board and management oversee climate-related risks and opportunities), strategy (the actual and potential impacts of climate risks on the business, strategy, and financial planning, assessed using climate scenarios), risk management (the processes used to identify, assess, and manage climate-related risks), and metrics and targets (the metrics and targets used to assess and manage climate-related risks and opportunities, including emissions data).

What is climate scenario analysis and why does TCFD require it?

Climate scenario analysis assesses how a company's strategy and financial position would hold up under different climate futures, typically including a scenario consistent with limiting warming to 1.5C or 2C (high transition risk, lower physical risk) and a scenario with higher warming (lower transition risk, higher physical risk). TCFD requires scenario analysis because it forces companies to think systematically about how climate change affects their specific business model under fundamentally different conditions, rather than making a single set of predictions. It is the most analytically demanding TCFD element and the one most frequently done inadequately.

Which companies must report against TCFD?

In the UK, TCFD-aligned disclosure is mandatory for premium-listed companies (from 2021), standard-listed companies (from 2022), large UK-registered companies and LLPs (from 2022), and FCA-regulated financial institutions including asset managers and pension funds (phased from 2022). The IFRS S2 standard, which incorporates TCFD, is being adopted at jurisdiction level globally, companies in jurisdictions that mandate IFRS S2 must comply with that standard. EU companies subject to CSRD disclose climate-related information under ESRS E1, which is aligned with but not identical to TCFD.

How does TCFD relate to CSRD?

CSRD's ESRS E1 (Climate Change) is designed to be interoperable with TCFD and IFRS S2. Companies that have produced TCFD disclosures have addressed the same four pillar structure (governance, strategy, risk management, metrics and targets) that ESRS E1 requires. However, ESRS E1 goes further in several areas, particularly on impact materiality (the company's impacts on climate, not just financial risks from climate), transition plan disclosure, and the biodiversity and water-related impacts of climate change. TCFD experience is a strong foundation for CSRD climate disclosure but does not constitute full compliance.

What are transition risks in TCFD terminology?

Transition risks are the risks arising from the shift toward a lower-carbon economy. TCFD categorises them as policy and legal risks (carbon pricing, emissions regulations, litigation), technology risks (displacement of carbon-intensive assets by cleaner alternatives), market risks (changing commodity prices, consumer preferences, investor sentiment), and reputational risks (perceptions of the company's contribution to climate change or its transition progress). Assessing transition risks requires analysis of how the company's specific revenue streams, cost structures, and assets are exposed to each of these categories under different policy and technology scenarios.

What metrics and targets does TCFD require companies to disclose?

TCFD requires disclosure of Scope 1 and Scope 2 greenhouse gas emissions and, if appropriate, Scope 3 emissions and related risks. Companies should also disclose the metrics they use to assess exposure to physical and transition risks, targets used to manage climate-related risks and opportunities, and performance against those targets over time. For financial institutions, TCFD recommends portfolio-level metrics such as weighted average carbon intensity (WACI) and financed emissions. IFRS S2 makes Scope 3 disclosure mandatory where material and adds industry-specific metrics from SASB standards.