Concerns Misplaced: Will Compliance With The TCFD Recommendations Really Expose Companies And Directors To Liability Risk?

Document summary

Since the release of the final recommendations of the G20 Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), investors have faced resistance from some investee companies to the request for disclosure of forward-looking climate-related risks. Company directors commonly cite legal barriers to TCFD-compliance, including liability exposure arising from future uncertainty and lack of assurance.

This report makes the case that this concern misunderstands the nature of the TCFD recommendations and potentially misrepresents the application of securities disclosure laws in many jurisdictions. The report concludes that, companies and their directors are likely to face greater liability exposure in many jurisdictions if they fail to assess and (where material) meaningfully disclose the financial risks associated with climate change and their impact on company performance and prospects.

This briefing provides an overview of relevant mandatory disclosure laws, and offers a concise response to each commonly-cited argument against TCFD-compliant disclosure. This report was the first of a series published on this topic by the Commonwealth Climate and Law Initiative.