Introduction In 2015, the G20 Financial Stability Board (FSB) established the Task Force on Climate-related Financial Disclosures (TCFD) with the aim of making recommendations to improve the quality of climate risk related disclosures. This facilitates more informed investment, lending and insurance decisions and allows market participants to better understand the concentration of GHG-intensive assets in the financial sector and the exposure of the financial system to climate-related and environmental risks. In a more transparent and stable market, these risks are more effectively incorporated into strategic decision-making, thereby supporting capital flows towards sustainable investments. The TCFD recommendations play an important role in the G30’s proposals for achieving carbon neutrality.1 According to this, by 2023 governments should make it mandatory for listed companies in all sectors of the economy to disclose their transition plans to a low-carbon economy and explain how they will align their business activities with the transition to a carbon-neutral economy. In making these plans public, the companies concerned should build on existing TCFD standards. The G30 report proposes a number of steps to increase the quantity and quality of these disclosures. For the MNB, one of the most important and urgent steps is that, although it is not a listed company, ‘central banks need to lead by example and publish fully TCFD-compliant disclosures’. In June 2017, the TCFD’s recommendations on climate-related financial disclosures were published, structured around four areas which represent the core elements of how organisations operate: internal governance, strategy, risk management, and metrics and targets (Chart 1). Although these recommendations are not sector-specific, a specific addendum for financial institutions has been developed, which mentions additional details as part of the recommendations (e.g. for credit institutions, disclosure is recommended where there is a significant credit concentration in carbon-intensive assets). Chart 1 TCFD recommendations
Governance
Strategy
Risk Management
Metrics and Targets
Source: FSB TCFD
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https://group30.org/images/uploads/publications/G30_Mainstreaming_the_Transition_to_a_Net-Zero_Economy.pdf
THE MAGYAR NEMZETI BANK’S CLIMATE-RELATED FINANCIAL DISCLOSURE • MARCH 2022
