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. and executive-in-residence and co-director of the Marquette S-Lab. He is also founder and chair of the board of Water + Energy Forward, a green bank focused on market-based climate solutions. He holds a PhD in investment governance and fiduciary effectiveness from Marquette University, where he has taught “Sustainable Finance” since 2009. He publishes Sustainable Finance and is co-author of The Trustee Governance Guide: The Five Imperatives of 21st Century Investing.

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