FSA Credential Level I study materials
FSA Credential Level I study resources

FSA Credential Level I: TCFD recommendations

FSA Credential Level I · Work through your exam, one topic at a time.

All guide sections

TCFD recommendations

TCFD recommendations are the 11 recommended disclosures under four pillars: governance, strategy, risk management, and metrics and targets. The exam tests the 11 disclosures, physical versus transition risk, scenario analysis, and the financial linkage.

The 11 disclosures

  • Governance: board oversight; management's role.
  • Strategy: climate-related risks and opportunities; impact on business, strategy and financial planning; resilience of strategy under scenarios, including a 2°C or lower scenario.
  • Risk management: identification and assessment; management; integration into overall risk management.
  • Metrics and targets: metrics used; Scope 1, 2 and 3 GHG emissions and related risks; targets and progress.

Worked example

A cement producer discloses board oversight and a carbon price assumption. In strategy, it explains that a higher carbon price raises kiln costs and shifts demand to lower-carbon blends. It tests resilience under orderly and disorderly transition scenarios and a hot-house world, then links capex and targets to the financial plan. The reasoning: scenario analysis tests strategic resilience; it is not a forecast and not only an emissions inventory.

Traps

  • Disclosing only Scope 1 and 2 and omitting material Scope 3.
  • Treating scenario analysis as a single point forecast.
  • Describing risks without financial or strategic effects.
  • Omitting board oversight or how climate risk is integrated into enterprise risk management.