TCFD Climate Risk Analysis

Climate-related risks and opportunities

Progressive climate change presents companies with a variety of risks, but also opens up opportunities, for example for new business areas. The recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) provide a clear framework for systematically analyzing and assessing climate-related opportunities and risks based on the latest scientific findings.
In order to make well-founded decisions, it is crucial to know the different types of climate risks and to classify them correctly. The TCFD distinguishes between two central risk categories that can affect companies in different ways, both operationally and strategically:

Transition risks and physical risks

Transition risks

Risks from the transition to a low-carbon economy:

  • Policies and regulations
  • Market environment
  • Reputation
  • Technological development

Transition risks arise from social and economic changes caused by decarbonization. Examples include CO₂ levies, changing consumer preferences, rising expectations of relevant stakeholder groups (e.g. investors, NGOs) or innovations that call existing business models into question.

Physical risks

Risks due to the physical effects of climate change:

  • Acute physical risks
  • Chronic physical risks

Physical risks relate to the direct effects of climate change on companies. These include damage caused by extreme weather events such as heatwaves, droughts or floods (acute risks) and long-term climatic changes such as rising temperatures or water shortages (chronic risks). They can have a significant impact on the availability of resources, supply chains or production sites.

The relevance of climate scenarios:

The extent of the future impact of climate change depends crucially on how quickly global emissions are reduced. Different scenarios – such as a Paris-compatible path or the “business-as-usual” path – lead to very different, sometimes non-linear consequences for the environment, society and the economy. This entails different risks and opportunities for companies, for example through regulation, market changes or physical climate impacts.

According to the TCFD recommendations, companies should analyze climate risks along at least two climate scenarios (e.g. 1.5 °C and RCP 8.5) and three time horizons.

These perspectives help to realistically assess the impact of different climate paths and to develop targeted strategies for risk mitigation and adaptation.

A climate risk analysis according to the TCFD guidelines offers various advantages:

  • Better understanding of climate-related risks and opportunities and integration into strategic planning
  • Identification of risk hotspots, for integration into existing risk management
  • Identification of new business opportunities, e.g. by expanding the range of climate-friendly products and services
  • Compliance with the requirements of Swiss legislation on non-financial reporting (OR 964 / Ordinance on Reporting on Climate Matters)
  • Increased transparency and credibility vis-à-vis investors and other stakeholders

The right approach for your company

We support you in analyzing risks and opportunities and ensure that you can make the best possible use of the insights gained. We also work with you to develop relevant content for your sustainability reporting. Whether you are analyzing climate-related risks and opportunities for the first time or updating an existing analysis based on new findings or changes in the framework conditions: We will work with you to find the right approach. In doing so, we take your specific corporate context into account and consider, for example, the life cycles of your products.

The recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) are officially recognized with the entry into force of the Ordinance on Climate-related Financial Disclosures in January 2024. Companies that report in accordance with the TCFD thus fulfill the current disclosure requirements on climate-related issues under Swiss law.

The TCFD has now handed over its work to the IFRS Foundation. The International Sustainability Standards Board (ISSB), which is also part of IFRS, is continuing the recommendations of the TCFD with the ISSB S2 standard. Accordingly, the Federal Department of Finance (FDF) submitted an amendment to the ordinance for consultation in December 2024: In future, there will no longer be an explicit reference to the TCFD, but rather to the international standards that continue its content – in particular ISSB and ESRS.

According to the FDF, this is a clarification of current practice, not an extension of the requirements. The consultation process is currently still underway; until it is completed, the existing requirements with TCFD apply as a reference framework.

How SuCo supports you

In line with the TCFD recommendations, we analyze the climate-related financial risks and opportunities for your company using a simple and structured approach. We guide you through the process step by step.

Our services include:

  • The identification of relevant climate risks and opportunities, based on your business model, along your value chain and with reference to international standards such as TCFD and IPCC.
  • A scenario analysis based on at least two climate scenarios (e.g. Paris-compliant & business-as-usual) and three time horizons (short, medium and long term).
  • The qualitative and quantitative assessment of risks and opportunities in terms of probability of occurrence and financial impact.
    The development of recommendations for specific adaptation and mitigation measures and integration into existing risk management systems.
  • Workshops and training for relevant internal target groups such as management, risk and sustainability teams.
  • Comparison with selected competitors on request, to classify your own results in the market environment.

Our three-step approach

Together with you, we determine which time horizons and climate scenarios are to be considered in the analysis. We then identify relevant physical and transitory climate risks and opportunities along your value chain, based on your business model and recognized frameworks such as TCFD. If you wish, we can compare your results with those of your most important competitors.

We assess the identified climate-related financial risks and opportunities of your company in accordance with the TCFD requirements. This is based on the latest scientific findings, including those from the IPCC reports. For each climate scenario, we assess qualitatively and – where possible – quantitatively how likely a risk or opportunity is and what impact it could have on key financial indicators. We discuss the results transparently with you.

We develop company-specific recommendations for concrete measures for the material risks with the aim of avoiding or minimizing risks and strengthening your climate resilience. We also support you in systematically integrating climate-related risks into your existing risk management system and preparing relevant content for your sustainability reporting.

What you receive from us

  • A TCFD-compliant risk and opportunity analysis with clear reference to recognized climate scenarios.
  • Concrete, implementable proposals for measures, tailored to your company.
  • A reliable basis for the strategic integration of climate issues into your business management.
  • Clear and comprehensible documentation, including a description of methods for your reporting – e.g. in accordance with OR 964, CSRD or ESRS.
  • Personal advice and support from experienced SuCo experts – from kick-off to the final results report.

FAQs

Transition risks are associated with the transition to a low-carbon economy. Examples include a changing market environment due to changing consumer preferences or disruptive new technologies, the impact of new climate policy and regulatory measures such as higher CO₂ levies or effects on a company’s reputation.

Physical risks are related to the physical impacts of climate change, for example on the availability of resources or the disruption of supply chains. They can be further subdivided into acute physical risks, which arise from a specific event (e.g. droughts, floods or forest fires), and chronic physical risks, which relate to longer-term changes in the climate (e.g. chronic heatwaves in summer and the associated reduced performance of the workforce).

Book a free initial consultation.

We invite you to acquaint yourself with us – with no obligation and tailored to your specific requirements.

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