Companies are under more pressure to report on environmental, social, and governance issues in a transparent way.

At the forefront of this movement are ESG accounting standards, providing investors and stakeholders with a comprehensive view of a company's sustainability performance.  

Global reporting standards differ but they share a few common threads. For that, you can thank the long-term influence of the Task Force of Climate-Related Financial Disclosures. The TCFD cemented ESG reporting standards as we know them today.  

The TCFD cemented ESG reporting standards
as we know them today.  

Historically, financial reporting frameworks primarily focused on quantifiable financial statements. But then concerns about climate change, social inequality, and corporate governance failures came center stage. A pressing need for companies to consistently and transparently complete sustainability disclosures emerged. 

Predecessors of the TCFD 

The Global Reporting Initiative (GRI) launched in 1997 to provide a comprehensive framework for ESG performance. Subsequently, the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC) developed their own standards. Both aimed to integrate ESG factors into corporate reporting.  

But it was the Task Force on Climate-Related Financial Disclosures' formation in 2015 that sparked current fervor. The TCFD was formed as a response to the failings of the 2015 Paris Agreement. It was established by G20 and the Financial Stability Board (FSB).  

The TCFD's Goals 

The TCFD took on the task of developing voluntary, consistent climate-related financial risk disclosures. Companies would use the disclosures to provide information to investors, lenders, insurers, and other stakeholders.  

Led by industry leaders and experts from various sectors, the TCFD released its final recommendations in June 2017. The recommendations provide a structured framework for companies to disclose climate-related risks and opportunities across four key areas:  

• Governance 

• Strategy 

• Risk management 

• Metrics and targets 

By focusing on these core areas, the TCFD framework enables companies to assess their risk exposure. And, of course, to capitalize on emerging opportunities.  

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Meet the Task Force 

At its helm was Michael R. Bloomberg, the former mayor of New York City and founder of Bloomberg LP. Bloomberg's extensive background in finance and environmental advocacy gave critical leadership to the task force's endeavors. 

Together, these members represent a broad spectrum of expertise encompassing finance, regulation, corporate governance and sustainability.  

Mark Carney - Economist and ex-Governor for the Bank of England, Carney was the UN Special Envoy for Climate Action and Finance. He brought invaluable insights into the intersection of climate change and financial stability. 

Mary Schapiro - Former head of the SEC, she brought her knowledge of regulations and capital markets to the TCFD. Her experience in shaping regulatory policies ensured that the task force's recommendations are both practical and effective. 

Feike Sijbesma - Former CEO of Royal DSM, contributes a wealth of corporate leadership experience and a commitment to sustainability. His insights into integrating climate considerations into business strategy are instrumental in guiding corporate disclosures. 

Fiona Reynolds - CEO of Principles for Responsible Investment (PRI). Reynolds' expertise in responsible investment drove TCFD's engagement with the investment community.  

Elroy Dimson - A professor at the London Business School, Dimson researched long-term investing. He aimed to assist the task force in gaining a better understanding of climate-related financial risks. 

ESG Accounting Today 

The TCFD's recommendations gained widespread recognition and support from investors, regulators, and businesses worldwide. Many leading companies started implementing TCFD-aligned disclosures into their reporting practices almost immediately.

They recognized the value of transparent and consistent communication about climate-related risks and opportunities. Regulatory bodies in various jurisdictions continue to endorse or require TCFD-aligned reporting.   

How the World is Taking on ESG Requirements

Dive into the differences & similarities in global regulations.

The task force disbanded in October 2023. Edenseven reports that the group, "fulfilled its purpose of enhancing corporate climate reporting by creating a widely utilized climate reporting framework." The International Financial Reporting Standards (IFRS) took over but made changes to GHG reporting. The IFRS offers a new, more detailed framework for international ESG reporting, risk management and climate related financial disclosures. 

Their framework was and still is foundational for future developments in ESG reporting. Companies who follow this framework foster greater transparency, accountability, and trust in the global financial system. Embracing ESG accounting standards enhance resilience and competitiveness. Most importantly, companies can contribute to a more sustainable and inclusive economy for future generations.