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International Journal of Research and Scientific Innovation (IJRSI) |Volume X, Issue I, January 2023|ISSN 2321-2705

Climate-Related Financial Disclosure in Supporting SDGs

Shami Syauqina Balqis Noor Shahidan1, Nur Ashikin Mohd Saat2*
1,2Department of Accounting and Finance, School of Business and Economics, Universiti Putra Malaysia
*Corresponding Author

IJRISS Call for paper

Abstract: – This paper focused on the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosure (TCFD) on the key information that must be disclosed in the climate-related financial report in order for the report to be useful and the organization’s environmental, social, and economic impacts to be appropriately governed. To support and implement the United Nations 2030 Sustainable Development Goals (SDGs) Agenda, the TCFD listed governance, strategy, risk management, and metrics and targets as the primary topics that must be presented in the climate-related financial report. Various TCFDs, United Nations and significant research on SDGs, sustainable reporting, and climate-related financial disclosures were referenced to critically review the TCFD’s recommendations, as well as the benefits and implementation issues of the recommendations. It was decided that the TCFD’s guidelines are vital and useful for monitoring organisations’ climate-related operations. The TCFD recommendations guidelines must be tightened to avoid the dangers of information inaccuracies and needless lawsuits; only then can the proposal to adopt it as reporting rules benefit diverse impacted parties.

Keywords: Task Force Climate-related Financial Disclosure (TCFD), Sustainability Development Goals (SDGs), Strategy, Governance, Risk Management.

I. Introduction

In 2015, the United Nations General Assembly voted to establish 17 Sustainable Development Goals (SDGs), which serve as a worldwide call to action to eliminate poverty, promote peace and prosperity, combat climate change, and safeguard the environment by 2030 (United Nations, 2015). These 17 objectives are interconnected, which means that when one area changes, it affects other areas as well.
From the standpoint of corporate reporting and accountability, one of the few things that can be done to promote the SDGs is for organizations to publish their sustainability reports (Tsalis et. al, 2020). According to Greer (2017), there is no standardized definition of sustainability reporting since there are several frameworks that might aid organizations in assessing and reporting their Environmental, Social, and Governance (ESG) concerns in corporate reporting. These frameworks will assist companies in communicating to the public their methods for building long-term value and the company’s success. It also serves as a tool for organizations to analyze and report on their contribution and effect toward attaining the SDGs.
The Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD) to produce guidelines on how to prepare climate-related financial disclosure in order to help organizations better understand their climate-related risks (TCFD, 2022(a)). Governance, strategy, risk management, and metrics and targets are the four suggestions that TCFD has released to help prepare this disclosure. By putting these suggestions into practice, organizations may better align non-financial risks with well-established enterprises and engage in activities that serve the SDGs (Silva & Figueiredo, 2020).
TCFD’s recommendations are forward-looking since its goals are to help the financial sector understand how climate-related problems and opportunities may influence an organization’s projected cash flow, assets, and liabilities (Greer, 2017; Popescu et. al, 2021). Implementing TCFD guidelines yields essential information that helps the financial industry to analyze firm risk profiles and make successful capital allocation choices. These suggestions have also been prepared for companies of all sizes, investors, assurance providers, and national governments, since they will help them make better analyses and choices (TCFD, 2022(b)).

II. Critical Practice and Empirical Insights

2.1 Four Recommendations from TCFD to Prepare Climate-Related Financial Disclosure

The Task Force has prepared four recommendations that may be implemented by all organizations from all industries to help them in creating a quality climate-related financial report (Recommendations of the Task Force on Climate-related Financial Disclosures, 2017). The key principles of how businesses work have been utilized to construct these guidelines to enable more effective disclosure.