"Climate change presents financial risk to the global economy." - TCFD 2023
The Task Force on Climate-related Financial Disclosures (TCFD) is an international group of experts that has developed a set of recommendations for companies to report on their climate-related risks and opportunities in 2015. The TCFD's recommendations are becoming increasingly important for the construction industry, as climate change is increasingly recognized as a major risk factor for the sector.
The TCFD's four recommendations:
- Governance: Companies should disclose how their board of directors and management oversee climate-related risks and opportunities.
- Strategy: Companies should disclose how climate change is incorporated into their business strategy and how they manage the risks and opportunities that arise from climate change.
- Risk management: Companies should disclose how they identify, assess, and manage climate-related risks.
- Metrics and targets: Companies should disclose the metrics and targets they use to measure and manage climate-related risks and opportunities.
Why are TCFD and climate adaptation so important in construction?
The TCFD's recommendations are designed to help companies understand and manage their climate-related risks and opportunities. By disclosing this information, companies can improve their transparency and accountability to investors and other stakeholders.
The construction industry is particularly vulnerable to the impacts of climate change. Extreme weather events, such as floods, storms, and droughts, can damage construction projects and disrupt supply chains. Climate change can also lead to rising sea levels, which can inundate coastal construction sites and make it difficult to build in some areas.
The TCFD's recommendations can help the construction industry to better manage these risks. By disclosing information about their climate-related risks and opportunities, companies can identify and prioritise the risks that are most important to them. They can also develop strategies to mitigate these risks and seize the opportunities that arise from climate change.
The wider adoption of TCFD standards
"A company that communicates its climate resiliency to its investors will have a competitive advantage over those that don’t.” – Mary Schapiro, Head of the TCFD Secretariat and Vice Chair for Global Public Policy at Bloomberg LP
The TCFD's recommendations are still relatively new, but they are gaining momentum in the construction industry. A growing number of companies are starting to disclose information about their climate-related risks and opportunities. As the TCFD's recommendations become more widely adopted, the construction industry will be better placed to manage the risks of climate change and seize the opportunities that it presents.
You can access the 2022 TCFD Overview booklet here.
Implications for the Construction Industry
The TCFD's recommendations have a number of implications for the construction industry. These include:
The need for better risk management: The construction industry needs to improve its risk management practices in order to mitigate the risks of climate change. This includes identifying and assessing climate-related risks, developing strategies to mitigate these risks, and monitoring the effectiveness of these strategies.
The need for new technologies: The construction industry needs to develop new technologies that can help it to adapt to the impacts of climate change. This includes technologies that can help to make buildings more resilient to extreme weather events, to reduce the environmental impact of construction projects, and create more sustainable communities.
The need for collaboration: The construction industry needs to collaborate with other industries and stakeholders in order to address the challenges of climate change. This includes collaborating with governments, insurers, and financial institutions to develop policies and regulations that support the transition to a low-carbon economy.
The TCFD's recommendations are a valuable resource for the construction industry. By following these recommendations, companies can better manage the risks of climate change and seize the opportunities that it presents.
Avoiding risks and seizing opportunities with TCFDs
In the rapidly evolving landscape of climate change, understanding and reporting on the Task Force on Climate-related Financial Disclosures (TCFD) risks and opportunities becomes pivotal.
Risks: Transition risks stem from efforts to progress towards a low-carbon economy, encompassing aspects such as legal reforms, technological advancements, and market shifts. Conversely, physical risks manifest from direct climate change impacts, including extreme weather events and rising sea levels.
Opportunities: On the brighter side, climate-related opportunities offer pathways to not only combat global warming but also ensure financial gains for proactive businesses. These opportunities, although unique to each organisation, broadly encompass resource efficiency, a shift to low-emission energy sources, and the proliferation of climate-conscious products and services. However, given the unpredictable nature of climate change, defining its financial repercussions remains a challenge, it necessitates continuous refinement in sustainability strategies, financial assessments, and scenario analyses.
The TCFD therefore emphasises the importance of both historical and predictive scenario evaluations to equip businesses with the insights they need in this dynamic environment. Their recent research shows that 85% of preparers implementing TCFD took action because climate related issues are material for their company, 77% because investors request such information and 26% because this TCFD is required by law or regulation. These numbers are expected to continue to grow.
You can find the 2022 Status Report here.
The TCFD's recommendations are becoming increasingly important for the construction industry. As climate change becomes more of a reality, companies in the construction industry need to take steps to mitigate the risks and seize the opportunities that it presents. By following the TCFD's recommendations, companies can improve their transparency and accountability to investors and other stakeholders, and they can also better position themselves for success in the future.
Is climate resilience important to you?
Climate resilience is becoming increasingly important for construction projects. Extreme weather events are becoming more frequent and severe, and they can have a devastating impact on construction sites. That's why it's essential to have a weather risk management platform that can help you mitigate the risks of climate change.
At EHAB, we believe that everyone should have access to the tools they need to build resilient construction projects. That's why we're offering our freemium version to everyone. Sign up today and start building a more climate-resilient future.
You can access our new freemium product here.
Task Force on Climate-related Financial Disclosures. (2022). 2022 TCFD Status Report. [PDF]. Available at: https://assets.bbhub.io/company/sites/60/2022/10/2022-TCFD-Status-Report.pdf
Task Force on Climate-related Financial Disclosures. (2022). Overview 2022. [PDF]. Available at: https://assets.bbhub.io/company/sites/60/2022/12/tcfd-2022-overview-booklet.pdf
Task Force on Climate-related Financial Disclosures. (2017). Recommendations of the Task Force on Climate-related Financial Disclosures. [PDF]. Available at: https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdf
Task Force on Climate-related Financial Disclosures. (2021). Guidance on Metrics, Targets, and Transition Plans. [PDF]. Available at: https://assets.bbhub.io/company/sites/60/2021/07/2021-Metrics_Targets_Guidance-1.pdf
Task Force on Climate-related Financial Disclosures. (2021). Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures. [PDF]. Available at: https://assets.bbhub.io/company/sites/60/2021/07/2021-TCFD-Implementing_Guidance.pdf