On 31st January 2022, the Climate Disclosure Standards Board (CDSB) was consolidated into the IFRS Foundation to support the work of the newly established International Sustainability Standards Board (ISSB). While this site and its resources remain relevant for preparers looking to improve sustainability disclosure until such time as the ISSB issues its IFRS Sustainability Disclosure Standards on such topics, no further work or guidance will be produced or published by CDSB. For further information please visit the IFRS website.

Exploring the challenges of climate disclosure - CDSB's response to the Task Force recommendations

The consultation on the Climate-Related Financial Disclosure recommendations released by the TCFD in December 2016 is now over. Our response reflects almost ten years of thinking and work we have done with our Board and Technical Working Group members.

When the Governor of the Bank of England Mark Carney announced the creation of the Task Force on Climate-related Financial Disclosures, back in December 2015, it felt a bit like groundhog day for CDSB. 

We looked back at the papers from 2007, when CDSB was founded at the World Economic Forum’s annual meeting in Davos. We read the original objectives of our organisation and found a striking alignment with the Task Force’s ones. 

CDSB was created to respond to the market demand for clear information about how climate change affects - or is likely to affect - the economic performance and prospects of companies. We were set up to align the needs of business and investors, connecting financial and non-financial corporate reporting, focusing on how climate change affects value creation. 

The CDSB Climate Change Reporting Framework, first released for public consultation in 2009, was therefore aimed at eliciting disclosures in mainstream financial reports for integration into investor analyses.

Hence CDSB is very supportive of the Task Force and its work. With backing from the Governor of the Bank of England, the Financial Stability Board and the G20, we believe it has the authority to truly consolidate and mainstream climate risk disclosure. Consequently, we eagerly awaited its recommendations.

In many ways the recommendations have met and exceeded expectations, especially given their renewed emphasis on corporate risk management, financial planning and scenarios. They build on the work of existing initiatives and provide thorough cross-references. 

However, given our 10-year-long experience with climate-related disclosure in mainstream reports, in reviewing the TCFD recommendations we identified several challenging issues. Here we summarise our technical response in a “wish list” and highlight two of our most important observations, as the Task Force works towards finalising the recommendations. 

Our wish list

The key elements we call on the Task Force to do in our technical response to the consultation are as follows:

  • Explore how the concept of materiality (how organisations can define what constitutes a material financial risk) should be applied to climate-related financial disclosure, leveraging the existing work of accountancy bodies and others;
  • Work with relevant standard setters (including IASB & FASB) to explore how the existing mainstream model could allow for the integration of climate-related financial disclosures;
  • Review the suggested illustrative metrics so that they incorporate more financial metrics. This ranges from indicative costs of supply to flexibility of capital deployment;
  • Rationalize and coordinate the recommendations and guidance to clarify distinct expectations and actions for companies;
  • Expand on how scenario analysis is to be conducted, for what purposes and how associated disclosures should be made.

We are aware that these are not easy tasks, but we believe the Task Force has the resources and authority to do so and finally make climate disclosure the new norm.


One of the most significant challenges that the Task Force needs to address is the way organisations define what constitutes a material climate risk for their businesses. 

The Task Force highlights the economic risks that climate change poses to organizations in the short, medium and long-term, and it suggests that organizations:

  • Determine what constitutes a material climate risk in the same way in which they determine the materiality of any other risk affecting their business and with financial filing requirements; and
  • Use their extensive experience in evaluating the materiality of particular risks.

We believe there are several issues with these points, as:

  • The uncertainty about the timing, scale and location of the risks associated with climate change makes it difficult to consider climate risk as any other business risk;
  • Existing reporting requirements are not eliciting the expected responses from companies; 
  • The effectiveness with which organizations are identifying, managing and disclosing climate risks is limited; and 
  • Current approaches to identifying material disclosures for mainstream reporting are not working. 

Some of these problems are acknowledged in the recommendations but we feel further efforts should be given to solving these problems in their recommendations. We have therefore made a number of suggestions to help which include:

  • Clarifying the expectations for data preparers to describe and disclose materiality processes, including how a company should leave out issues that are not material to their business;
  • Leveraging the experience and work of NGOs such as CDP, CDSB, IIRC and SASB (which serve a predominantly investor audience) to fill the gaps in the way that materiality is applied to climate change reporting; and

Encouraging companies to make a distinction between:

  1. Material risks known to the company at the time of reporting and already affecting the business, its strategy and financial planning;
  2. Disclosures about the future that are part of mainstream reporting practice. This includes balance sheet entries that estimate future assets and liabilities, or entries required to establish the business as a going concern;
  3. Issues that relate to future risk beyond the business’ normal planning horizon;
  4. Matters of systemic importance - where the organization is required to report information that can be assessed at aggregate level in macroeconomic analysis or by policy makers - relevant to the organization’s license to operate. 

The mainstream report and accounting considerations

A second challenge is that the mainstream report into which companies are meant to integrate their climate-related financial information is not wholly fit for that purpose. Mainstream reporting expects information prepared according to financial reporting standards and governance codes. 

Some of the Task Force recommendations relate to the structures and standards associated with the mainstream report, in particular, their categorization of financial climate risks using the nomenclature of assets, liabilities, expenses and revenues. But this relationship is complicated and climate reporting may not easily fit into current accounting rules. For example, the types of risks and impacts that the TCFD takes into consideration are not recognized as affecting assets and liabilities on balance sheets according to financial reporting rules. 

There is therefore an opportunity for the Task Force to examine the connection between its recommendations and existing financial statement requirements (e.g. IAS 37 & 36 related to contingent assets/liabilities and asset impairment). 

There are also opportunities to explore how the four areas of disclosure - governance, strategy, risk and management - can be integrated into the relevant components of the mainstream report, accounting for existing legal obligations. 

We believe the Task Force has a great opportunity to take climate disclosure to a new level, and we look forward to seeing the final recommendations later this year.