Task Force on Climate-related Financial Disclosures (TCFD)

The Task Force on Climate-related Financial Disclosures (TCFD) represents a globally recognised framework designed to improve and standardise the reporting of climate-related financial risks and opportunities. Established by the Financial Stability Board, the TCFD has become increasingly significant for banking and financial systems worldwide, including in India, where climate change intersects closely with economic development, financial stability, and sustainable growth. In the Indian context, the relevance of TCFD extends beyond voluntary disclosure to influencing regulatory approaches, risk management practices, and long-term economic resilience.

Background and Evolution of TCFD

The Task Force on Climate-related Financial Disclosures was created in 2015 in response to growing concerns that climate-related risks were not adequately reflected in financial decision-making. Its primary objective is to enable companies, banks, and financial institutions to disclose consistent, comparable, and decision-useful information on climate-related risks. The framework is structured around four core pillars: governance, strategy, risk management, and metrics and targets.
Globally, the TCFD has been endorsed by regulators, central banks, investors, and multinational corporations. Although initially voluntary, it has increasingly shaped mandatory disclosure regimes in several jurisdictions. For emerging economies such as India, the framework offers a structured approach to integrating climate considerations into financial systems without undermining growth priorities.

Climate Change and Financial Risk in India

India is among the most climate-vulnerable economies due to its geographical diversity, dependence on agriculture, and rapidly expanding urban and industrial sectors. Climate change poses both physical risks, such as floods, heatwaves, and cyclones, and transition risks arising from shifts towards low-carbon technologies and regulatory changes. These risks have direct implications for banks, insurers, and capital markets.
The Indian financial system is particularly exposed because a significant proportion of bank lending is directed towards infrastructure, energy, agriculture, and small and medium enterprises. Climate-induced disruptions can impair asset quality, increase non-performing assets, and threaten financial stability. In this context, the TCFD framework provides a mechanism to identify, measure, and disclose such risks systematically.

TCFD and the Indian Banking Sector

Indian banks, especially public sector banks, play a central role in financing economic development. However, traditional credit appraisal models have often overlooked long-term environmental and climate-related risks. Adoption of TCFD principles encourages banks to incorporate climate scenarios into strategic planning and credit risk assessment.
Under the governance pillar, banks are expected to disclose board-level oversight of climate risks and management responsibilities. This is particularly relevant in India, where regulatory emphasis on corporate governance has intensified. The strategy pillar requires banks to assess the resilience of their business models under different climate scenarios, including those aligned with global temperature targets. For Indian banks with long-tenure loans in carbon-intensive sectors, this analysis is critical.
Risk management disclosures under TCFD align closely with prudential norms, enabling banks to integrate climate risks into existing frameworks for credit, market, and operational risk. Metrics and targets further support the measurement of financed emissions, green lending exposure, and progress towards sustainability goals.

Role of Financial Institutions and Capital Markets

Beyond banking, non-banking financial companies, insurance firms, and institutional investors in India are increasingly influenced by TCFD-aligned expectations. Insurance companies face rising claims from climate-related disasters, while asset managers must consider climate risks in portfolio allocation and stewardship activities.
Indian capital markets are also responding to global investor demand for transparency. TCFD-aligned disclosures enhance comparability and credibility, thereby improving access to international capital. For Indian firms seeking foreign investment or listing overseas, climate-related disclosure has become an important determinant of investor confidence.

Regulatory and Policy Context in India

While TCFD adoption in India remains largely voluntary, regulators have begun aligning domestic frameworks with its principles. The Reserve Bank of India has acknowledged climate risk as a source of systemic financial risk and has encouraged regulated entities to enhance climate risk management. Similarly, securities regulators have introduced business responsibility and sustainability reporting requirements that reflect elements of the TCFD framework.
India’s broader policy commitments, including its nationally determined contributions under the Paris Agreement and targets for renewable energy expansion, further reinforce the relevance of climate-related financial disclosures. TCFD provides a bridge between macro-level climate policy objectives and micro-level financial decision-making.

Implications for the Indian Economy

At the macroeconomic level, widespread adoption of TCFD principles can strengthen the resilience of the Indian economy. Improved disclosure enhances risk pricing, reduces information asymmetry, and supports the efficient allocation of capital towards sustainable activities. This is particularly important for India, which requires substantial investment to meet its development and climate goals simultaneously.
TCFD-aligned disclosures can also support the growth of green finance in India by providing clarity on climate risks and opportunities. This includes financing renewable energy, climate-resilient infrastructure, and low-carbon technologies, which are essential for long-term economic competitiveness.