Climate change is one of the main strategic challenges facing companies today. Extreme weather events, regulatory transitions, and market shifts can compromise financial stability and operational resilience. For this reason, assessing and managing climate-related risks is not only an emerging obligation but also a competitive advantage.
The Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board in 2015, provides companies with guidelines for identifying, assessing, and transparently disclosing climate-related risks and opportunities. The TCFD offers a structured approach to climate disclosure, organized around four key areas:
- Governance: how the company governs climate-related risks and opportunities;
- Strategy: how these risks impact corporate strategy and financial planning;
- Risk Management: processes for identifying, assessing, and managing climate risks;
- Metrics and Targets: quantitative data used to monitor exposure and evaluate the effectiveness of actions taken.
With the implementation of the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), the TCFD framework has been formally integrated into reporting requirements, making it a de facto standard for many companies.
Circularity supports companies in assessing physical and transition climate risks based on the TCFD framework, using a customized, multidisciplinary approach grounded in scientific data and internationally recognized scenarios (such as those from the IPCC and IEA).
The climate risk assessment process is structured into several phases, tailored to the complexity and industry of the organization:
Preliminary analysis to understand the company context, define the scope of the assessment, and identify strategic priorities. This phase also includes evaluating current governance mechanisms and how climate-related issues are integrated into corporate strategy.
Assessment of risks related to acute climate events (e.g., floods, heatwaves) and to regulatory, technological, and reputational changes. This includes evaluating potential impacts under different climate change scenarios on assets, supply chains, and business models.
Establishment of performance indicators and monitoring tools to report on and improve climate resilience over time, along with the definition of decarbonization targets aligned with the company’s strategy.
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Development of the final report in line with TCFD recommendations, structured around the four TCFD pillars: Governance, Strategy, Risk Management, and Metrics & Targets. The report can be integrated into the sustainability report and the management report.
Benefits for Companies
Growing attention from stakeholders, investors, and regulatory authorities makes it essential to adopt tools for proactive climate risk management. Implementing a TCFD-aligned approach not only enhances transparency but also strengthens long-term resilience and business value.
- Regulatory compliance with CSRD, SFDR, and other EU directives
- Easier access to capital: financial institutions assess the share of aligned activities
- ESG credibility: improved reputation and reduced risk of greenwashing
- Strategic transition tool: identification of areas for improvement to strengthen corporate sustainability
- Tailored approach: our service is adapted to the company’s operational and sector-specific context
TCFD 4 KEY AREAS
The TCFD framework outlines four key areas that cover the essential aspects of governance and climate risk management within organizations. Here they are described:
This area refers to how corporate governance oversees climate-related risks and opportunities. It includes management’s involvement in assessing and managing these risks, as well as the board of directors’ role in monitoring climate-related issues.
Focuses on the actual and potential impacts of climate change on the company’s business, strategy, and financial planning. Companies are expected to describe, in particular: the resilience of their strategy under different climate scenarios, short-, medium-, and long-term climate risks and opportunities, and the potential impact on their value chain and business model.
Describes how the organization identifies, assesses, and manages climate-related risks. This includes the distinction between physical and transition risks, as well as how climate risk is integrated into the company’s overall risk management framework.
Covers the metrics used to assess and manage climate-related risks and opportunities. Organizations are expected to disclose data on GHG emissions (Scope 1, 2, and, where possible, Scope 3), the metrics used to measure risks and opportunities (e.g., greenhouse gas emissions, energy use), and the climate-related targets set, along with progress toward achieving them.
Monitor Your Company’s Climate Risks with the TCFD Framework
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