Three Years Into TCFD’s Final Recommendations: Lessons From Implementation In The Financial Sector

Vinson & Elkins LLP

Vinson & Elkins LLP

The Task Force for Climate-Related Financial Disclosures (“TCFD” or the “Task Force”) was established by the G-20 Financial Stability Board in 2015 to encourage the disclosure of consistent climate-related financial information. In 2017, the Task Force published final recommendations, along with the accompanying technical supplement and annex, which includes supplemental guidance for certain sectors (together, the “TCFD Framework”). Since that time, several hundred companies and organizations have endorsed these publications, helping to make the TCFD Framework the core standard for climate disclosure. In particular, institutions in the financial sector—driven in large part by major institutions in the US, the Commonwealth, and the EU—have worked both independently and through programs like the United Nations Environment Programme Financial Initiative (“UNEP FI”) pilot programs to implement the TCFD Framework in their own climate reporting. Such implementation of the TCFD Framework has led the financial sector to signal that they will be realigning their portfolios for a low-carbon future and plan to help clients in adapting to that future as well.

Implementation of the TCFD Recommendations

The recommendations consist of 4 categories of disclosure, each with general requirements:1

Three Years Into TCFD’s Final Recommendations: Lessons from Implementation in the Financial Sector

Many such initiatives have proliferated, but some of the most prominent include the: According to the TCFD’s 2019 Status Report, companies have taken steps towards implementing the TCFD Framework, though greater progress is still needed. For the financial sector in particular, the role of sustainability has been elevated within several institutions’ governance structures, either through the creation of new positions or the rearrangement of banks’ strategic resource deployment. For example, in August, Barclays PLC announced the appointment of several top bankers to its new sustainability teams.2 Additionally, to help with the forward-looking assessment and disclosure of climate-related risks and opportunities, several banks have joined various initiatives to pioneer modelling and metrics for climate-related information.

  • [Center for Climate-Aligned Finance
  • Paris Agreement Capital Transition Assessment (“PACTA”)
  • Partnership for Carbon Accounting Financials
  • Poseidon Principles
  • UNEP FI pilot program]

These initiatives have different foci. For example, UNEP FI’s pilot program is a multi-phase workshop for transition and physical risk scenario analysis. Others, such as PACTA and PCAF, aim to help financial institutions produce detailed quantitative reviews of the carbon emissions associated with their portfolios and set targets for reducing emissions associated with their financing activities. Regardless of focus, these initiatives are all being used by banks to help them in fully incorporating the risk management and strategy aspects of the TCFD Framework.

However, these banks have been clear in their reports that the goal is not to sever connections with their more carbon-intensive clients, but rather to help those clients adapt to a low-emissions world. Citi has indicated that it is committed to implementing TCFD’s recommendations and collaborating with its clients and peers to “accelerate our understanding of the climate risks faced by Citi and our clients and the possible pathways for our collective transition to a low-carbon economy.”3 As Bank of America put it, financial institutions aim to rebalance portfolios away from carbon-intensive activity “through engaging with clients and accelerating their progress towards low-carbon business models.”4 As another example, JPMorgan mentions that the objective is “to support companies that are thinking strategically about the transition to a lower-carbon future and positioning themselves to adapt.”5 Financing to facilitate carbon-intensive clients’ advancement towards lower-carbon business models is an important business opportunity frequently mentioned in banks’ climate strategies. For example:

  • Bank of America lists “supporting and accelerating our clients’ low-carbon transition” as a key prong of its climate strategy and explicitly notes that a critical part of this is “strong engagement and partnership with clients in fossil fuel or emissions-intensive sectors.”6
  • Standard Chartered notes that in aligning its lending with the long-term goals of the Paris Agreement, the bank’s objective is to “achieve this through supporting our clients with the capital they need as they transition their businesses and reduce their carbon emissions.”7

Companies in carbon-intensive industries should be aware of this emerging reality—that a drive towards lower-carbon business is being integrated into financial institutions’ strategies—and prepare to adapt to it, although it is not yet clear just when and how quickly this decarbonization effort will occur.

Impacts to Financial Institutions’ Clients

As part of their increased consideration of climate risks, several financial institutions have started to obtain more detailed sustainability information from their clients. This can come in the form of questionnaires, requests for facility emissions data, or other key metrics required for banks to assess sustainability criteria. For example, certain of JPMorgan’s clients are subject to E&S due diligence that includes a review of “operating approaches to assess factors that could change a client’s forward credit profile,” which includes any climate-related factors that the bank deems pertinent.8 Similarly, Standard Chartered is specifically developing a series of questionnaires to collect emissions data from its clients.9

Beyond data requests, significant portions of the financial sector are also signaling changes to lending strategies. Currently, many of these are focused on restricting financing for some of the most carbon-intensive activities, such as coal-fired power plants or coal mining.10 But some banks have already taken steps beyond more controversial coal practices. For example, the Royal Bank of Scotland announced goals for a material reduction in the climate impact of its financing activities and established an explicit carbon intensity reduction target for its equity portfolios.11

Banks know that companies cannot adjust their emissions overnight. However, companies with emissions levels that are deemed by a bank’s own climate risk management processes to be higher risk, may start to see their lenders demand evidence of some strategy to come into compliance with emissions levels that the financial institution deems acceptable in order to continue accessing credit. As the data becomes more refined, these thresholds could continue to move.


Overall, banks have made significant progress towards incorporating the final recommendations of the TCFD. Doing so has resulted in: (1) a proliferation of quantitative data exercises, which can at times be granular and targeted; (2) portfolio emissions evaluations and declarations of associated decarbonization initiatives; and (3) announcements of engagement with financial institutions’ clients to help them adapt to a low-carbon world. While these institutions are still evaluating how best to implement the TCFD recommendations, companies should expect to see the results of this evaluation start to influence their interactions with their financiers, particularly in terms of data requests and, eventually, expectations regarding strategy for a low-carbon business model.

1 See TCFD Final Report Recommendations of the Task Force on Climate-Related Financial Disclosures at Figure 2 (2017), available at

2 Jenny Surane, Barclays Beefs up Sustainability Unit with Banker Shuffle, Climatewire (Aug. 11, 2020), available at

3 Citi, Environmental and Social Policy Framework, 15-16 (July 2020), available at

4 Bank of America, Responsible Growth and a Low-Carbon Economy at 17 (2019), available at

5 JPMorgan, Understanding Our Climate-Related Risks and Opportunities at 16 (2019), available at

6 Bank of America, supra note 3, at 11.

7 Standard Chartered, Climate Change/Taskforce on Climate-Related Financial Disclosures (TCFD) Report at 19 (2019), available at

8 JPMorgan, supra note 4, at 12.

9 Id. at 11.

10 See Barclays, Environmental Social Governance Report at 54 (2019); Goldman Sachs, Environmental Policy Framework (2019), available at; JPMorgan, supra note 4, at 8.

11 Royal Bank of Scotland, Annual Report at 38–39 (2019), available at

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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