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The Paris Agreement and the Task Force on Climate-related Financial Disclosures

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              The TCFD Recommendations were published in June 2017.

Although some climate scientists might disagree, it can be said that work on climate change came of age in 2015 at COP21. Held in Paris that year, the United Nations Framework Convention on Climate Change (UNFCCC) annual event, which progresses the UN’s work on climate change, led to the Paris Agreement. This Agreement came into force during 2016 when the required hurdle of formal country commitments was reached.

The Paris Agreement is a comprehensive global commitment to tackle climate change. The Conference of the Parties (COP) process is part of the UNFCCC governance process. COP26, due to have been held in Glasgow in late 2020, was postponed because of the Covid-19 crisis and will now be held from 1–12 November 2021.

The Paris Agreement’s central aim is to strengthen the global response to the threat of climate change by keeping the global temperature rise this century to well below 2 degrees celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5 degrees celsius. Additionally, the agreement aims to strengthen the ability of countries to deal with the impacts of climate change. The temperature rise is already above 1 degree.

These goals are covered in Article 2.1 (a) and (b) of the Agreement while Article 2.1 (c) states the supportive: Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

Limiting temperature rise to achieve the Paris Agreement’s central aim is referred to as one possible future ‘scenario’. Other scenarios with higher temperatures are also possible if global efforts are not successful. The different ways that these end-century scenarios might evolve are referred to as ‘pathways’. Different pathways might be driven by transition from carbon-based to carbon-free energy at different pace (or no transition), linked to government policy actions at different times and resulting in different impacts on financial markets.

At the Paris COP21, the Financial Stability Board (FSB) launched the Task Force on Climate-related Financial Disclosures (TCFD). TCFD’s goal was to develop voluntary, consistent climate-related financial risk disclosures. The TCFD Recommendations were published in June 2017.

Since that time, the recommendations have been embraced globally by companies and other financial institutions. There is a general move to make them mandatory in some countries and in some sectors, for example in the UK.

In November 2020 the UK government announced that the UK is heading towards mandatory disclosure within five years: TCFD taskforce interim report and roadmap. The TCFD Knowledge Hub offers an extensive selection of resources.

2015 was also the year that Transforming our world: the 2030 Agenda for Sustainable Development with its 17 Sustainable Development Goals (SDGs) was adopted by all UN member states. The agenda is a universal call to action to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere. While SDG13 is specifically about climate action, the SDGs are deliberately interdependent and many of the other goals are also relevant to climate change, for example SDG7 Affordable and Clean Energy. The SDGs are a mechanism with which to hold governments to account for progress on the agenda.

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