Implementing the TCFD Recommendations: a Roadmap for the Brazilian Banking Sector

2019, 5 April

The executive summary “Implementing the TCFD Recommendations: a Roadmap for the Brazilian Banking Sector”, is the result of a study conducted by the Brazilian Federation of Banks (FEBRABAN), supported by SITAWI Finance for Good, that proposes a myriad of actions to be taken by the Brazilian banking sector in order to get gradually closer to the recommendations given by the Task Force on Climate-related Financial Disclosures (TCFD).

In 2017, the task force created by the Financial Stability Board published a series of guidelines for companies and financial institutions to divulge information related to the financial impact of climate change in their businesses and the internal practices developed in response to this issue. The main goal is to create a larger understanding inside the financial market about how physical and transitional risks, and opportunities related to climate change can impact their activities.

Over 500 institutions have already formalized their support to the TCFD, and countries such as France are already incorporating the recommendations to their regulations. In the Brazilian banking sector, the social and environmental risks agenda, particularly after Resolution CMN 4327/2014, has been a facilitator of these efforts.

Beyond acquiescing to the regulations, banks with a larger sensibility to climate issues are developing risk management processes to clients whose exposure to climate change are more acute, creating opportunities in the transition towards a low-carbon economy, more resilient to climate change.

Commencing with the comprehension of the vulnerability that climate change imposes on their portfolios and how the TCFD recommendations dialogue with previously established practices and other social and environmental risk frameworks, the banking institutions need to have a specific lens focused on the climate dimension of the incorporation of ESG questions to the strategy and management of risks and opportunities.

In light of these facts, the work done by FEBRABAN and SITAWI culminated in an action plan with steps that will increase the proximity between Brazilian banks and the TCFD recommendations.