The Task Force on Climate-related Financial Disclosures (TCFD) recommendations were developed in response to a perceived failing in corporate financial reporting. Specifically, that existing financial disclosures were insufficient for investors to properly evaluate enterprise value over the long term. Given the expected impacts of climate change over the next 50 years, and the nearer-term impact of associated regulation and consumer trends, the Task Force believed investors needed more information on the climate- related risks and opportunities faced by corporates, and their implications for business strategy.

Efforts to ensure the recommendations spoke to an investor audience firmly shaped the recommendations, and are particularly evident in the inclusion of a scenario analysis component. The Task Force hoped that a scenario analysis could take relatively esoteric disclosures on climate risks and opportunities and translate them into tangible financial implications, increasing the credibility and utility of corporate reporting for investors.

Whether this aim has been achieved in practise remains a matter of some debate, as uncertainty surrounds the accuracy of long-term climate risk models.

Nonetheless, scenario analyses remain a key part of a complete TCFD disclosure and reflect growing expectations of best practice - although scenario analysis is generally considered to be one of the most challenging and technical aspects of the TCFD recommendations.

This document aims to help you discover:

• What a scenario analysis is

• What investors expect of them, and how investors are using them

• How to conduct a scenario analysis

If you have any questions about the insights or would like to learn more about how we can help you meet reporting requirements, please get in touch by emailing us at hello@sillion.co.uk 

 About Sillion 

Sillion is the leading transition consultancy, offering in-depth insights and strategies to help FTSE100 companies effectively utilise sustainability communications and position for competitive advantage. The "State of Sustainability Communications Report" provides a comprehensive overview of how UK communications leaders are preparing for the sustainable transition, uncovering the challenges and opportunities sustainability poses in the communications sector. The report comes two years after the consultancy released its guidance on communicating net zero for communications professionals.  

 
Email:  hello@sillion.co.uk 
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Website:  sillion.co.uk