ESG Insight

Institute of International Finance TCFD template reflects greater engagement from banks

Singapore

Since the release of the Taskforce on Climate-related Financial Disclosures (TCFD), financial institutions have made some progress with ESG, but the Institute of International Finance is a strong support, Fiona Keating writes.

In a bid to assist the banking sector, the Institute of International Finance (IIF) launched a new TCFD Guidance Template in November 2021, to help banks align their climate-related disclosures with the recommendations of TCFD.

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The template is designed as a voluntary open-source toolkit to complement existing sources. Furthermore, it incorporates industry practices including mapping and benchmarking of TCFD reports from the banking sector.

The IIF’s toolkit sets out these objectives:

  • To support firms to respond to evolving disclosure needs, including on emerging disclosure themes
  • Assist firms to structure key quantitative and qualitative disclosures where different practice exists
  • Help to improve the granularity of key quantitative and qualitative disclosures, including business-line and product-specific levels
  • Encourage industry dialogue to drive greater comparability in disclosures by helping to identify sets of common metrics and indicators relevant to different business models.

“The template reflects the latest developments in areas of metrics, targets and other quantitative information which financial institutions may seek to disclose, including the evolving areas of climate-related commitments and transition plans,” Senior Policy Advisor, Sustainable Finance Jeremy McDaniels told ESG Insight.

After engaging with a group of global banks that are members of the IIF’s Sustainable Finance Working Group (SFWG) and UNEP FI’s TCFD pilot program, they developed a TCFD Playbook to serve as a resource for firms at different stages on their journey toward fully aligned and comprehensive TCFD reporting.

“There is a major upswing and interest across our members in efforts to develop really consistent and robust disclosures in the TCFD framework and also reflects a translation of the tcfg framework as a voluntary market-led standard into a formal supervisory, regulatory and policy instrument,” reports McDaniels.

In 2020 the IIF worked with the United Nations Environment Programme Finance Initiative to develop a playbook for TCFD practices in the market.

The aim was to “provide a practical view on what disclosure method and technologies were relevant for financial institutions, specifically looking at banks.”

McDaniels highlights that the issue of comparability and consistency will be especially problematic when looking at areas where “disclosures are evolving quite rapidly, including disclosures under strategy section C which pertains to forward-looking risk assessment and scenario analysis.”

He notes that there is a “significant increase in uptake, and the number of disclosure agreements is expanding in length.

“Another really important question we are seeing from institutions is on what metrics should be used to quantify climate risks and opportunities. We made an important step forward in presenting a common set of cross-industry climate-related metrics but there are still a number of important questions emerging in terms of what specific metrics may be relevant for different business models in the financial sector.”

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