Following the release of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)1, a leading financial services group in North America wanted to understand the extent to which its existing disclosures met the recommendations and to improve its disclosure where necessary.
KPMG in Canada evaluated the company's disclosures, investment policies and approaches for addressing climate change to determine to what extent the client's practices and policies were in line with the TCFD recommendations and industry best practice. KPMG also conducted interviews with senior executives across the group from risk to finance and sustainability.
KPMG found that the client's existing governance processes were largely in line with the TCFD recommendations and the group was following industry best practice. For example, the group had implemented Board-level committees that measured and addressed climate-related risks and reported regularly to the Board. There was also strong executive commitment towards on-going management of climate-related risks.
At the same time, KPMG identified several opportunities to strengthen the company's ability to respond to the TCFD recommendations. While the company had conducted scenario analysis for various climate scenarios, KPMG recommended that the client should perform additional risk analysis under a “2 degree” scenario, in line with the TCFD recommendations2. The KPMG team also made further recommendations for the client to expand its existing climate change strategy through additional long-term goals and targets.
With KPMG's support, the client now has a better understanding of what it needs to do to align its financial disclosures with the TCFD recommendations. It has also developed a short-term action plan towards full alignment. KPMG continues to support the group on this journey, for example through workshops to assess the potential impact of various climate scenarios on the group's business and financial performance.
1The Task Force on Climate-related Financial Disclosures (TCFD) released recommendations in 2017 which focus specifically on business disclosure of how climate change affects financial performance now and in the future.
2A scenario under which the Earth's temperature has risen more than 2 degrees Celsius above pre-industrial levels.
Wim Bartels, KPMG in the Netherlands.