TCFD View of Materiality No Longer Adequate – UNEP FI Chief (ESG Investor)

Usher calls for double materiality approach in ESG investment decision making.

The materiality definition adopted by the Task Force on Climate-related Financial Disclosures (TCFD) is insufficient in serving the battle against climate change, Eric Usher, the Head of UN Environment Programme Finance Initiative (UNEP FI), said today.

Speaking at the Climate Risk and Green Finance Regulatory Forum, Usher explained that the TCFD was established initially by the Financial Stability Board (FSB) with the aim of ensuring financial stability, rather than climate stability.

This “exclusive focus” on systemic risk to the finance sector resulted in a “short-term outside-in approach to materiality” that would not drive real-world change, Usher suggested.

“What we need to add is inside-out leadership, focusing on the impact of financing [on] the targeted outside dimension, which aligns financing and financial portfolios with societal objectives, such as keeping the climate within 1.5 degrees of warming,” he said.

Author: Christopher K. Merker, Ph.D., CFA

Christopher K. Merker, PhD, CFA, is a director with Private Asset Management at Robert W. Baird & Co. He holds a PhD in investment governance and fiduciary effectiveness from Marquette University, where he has taught the course “Sustainable Finance” since 2009. Executive director of Fund Governance Analytics (FGA), an ESG research partnership with Marquette University, he is a member of the CFA Institute ESG Working Group, an international committee currently exploring ESG standards, publishes the blog, Sustainable Finance, which covers current topics around governance and sustainability in investing, and is co-author of the book, The Trustee Governance Guide: The Five Imperatives of 21st Century Investing.

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