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© 2019 By The SASB Foundation (fiSASBfl) and CDP Worldwide on behalf of the Climate Disclosure Standards Board (CDSB). All rights reserved. No liability can be accepted by SASB or The SASB Foundation, CDP Worldwide or CDSB for any claim made arising out of or in connection with the use or reliance upon the contents of this document or any part of it. ABOUT CDSBThe Climate Disclosure Standards Board (CDSB) was founded in 2007 and is an international consortium of nine business and environmental NGOs committed to advancing and aligning the global mainstream corporate reporting model to equate natural capital with financial capital. It does so by offering companies a framework for reporting environmental and climate information with the same rigor as financial information. In turn, this helps them to provide investors with decision-useful environmental and climate information via the mainstream corporate report, enhancing the efficient allocation of capital. Regulators also benefit from compliance-ready materials. Collectively, CDSB aims to contribute to more sustainable economic, social, and environmental systems. ABOUT SASBThe Sustainability Accounting Standards Board (SASB) connects businesses and investors on the financial impacts of sustainability. An independent, standard- setting organization founded in 2011, SASB™s mission is to help businesses around the world identify, manage, and report on sustainability factors that matter to investors. SASB standards are developed based on extensive feedback from companies, investors, and other market participants as part of a transparent, publicly documented process. By focusing on the sustainability factors most likely to have financially material impacts in each of 77 industries, SASB standards enable investors and companies to compare performance from company to company within an industry. CDSB Plantation Place South, 60 Great Tower Street EC3R 5AD London, UK +44 (0) 203 818 3939 cdsb.net Sustainability Accounting Standards Board 1045 Sansome Street, Suite 450 San Francisco, CA 94111 USA +1 (415) 830-9220 sasb.org

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Contents1 Executive Summary 2 Part I: Overview 3 Introduction 3 Enter the TCFD Recommendations 4 SASB and CDSB: Practical Tools 6 Part II: Getting Started 7 Getting Started on TCFD Implementation 7 Laying the Groundwork for Effective Disclosures 11 Part III: Good-Practice Disclosures 12 TCFD-Aligned Sample Disclosures16 About the Mock Disclosures17 Core Element 1: Governance 23 Core Element 2: Strategy 36 Core Element 3: Risk Management 47 Core Element 4: Metrics & Targets 56 Mock Disclosures: Key Takeaways 58 Part IV: Looking Ahead 59 Conclusion61 Glossary 61 Resources

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1Executive Summary In June 2017, the Task Force on Climate-related Financial Disclosures (TCFD) issued its final recommendations for producing consistent, comparable, clear, and reliable corporate disclosures of climate-related information that would support informed decision-making and capital allocation by investors, lenders, and insurance underwriters. More than a year and a half later, although more than 617 organizations1 have publicly expressed support for the TCFD, far fewer appear to have used the recommendations to guide their climate-related disclosures. In explaining this implementation gap, market participants have cited a need for practical guidance for companies to use in attempting to fulfill the principles-based recommendations and make the 11 recommended disclosures in their mainstream reports. The Sustainability Accounting Standards Board (SASB) and the Climate Disclosure Standards Board (CDSB), two well-established organizations with rigorously developed TCFD-aligned reporting tools, are uniquely positioned to provide this guidance.This paper is the first in a series of practical, TCFD-focused resources CDSB and SASB intend to develop and make available in the coming months and years, as climate-related tools and reporting practices continue to mature. By offering how-to guidance, this publication aims to help companies enhance the robustness, consistency, comparability, and utility of TCFD implementation and reporting through SASB and CDSB™s market-tested frameworks, standards and resources. Regardless of whether an organization has a sophisticated approach to managing climate risks and opportunities or is just getting started, it can use this guidance to move forward in supporting improved decision-making, enhanced market resilience, and more sustainable economic growth. 1 as of March 2019. See https://www.fsb-tcfd.org/tcfd-supporters/ The guidance adheres to the following structure: Ł Overview: An overview of the TCFD, SASB, and CDSB, and the drive for effective corporate climate- related disclosures; Ł Getting Started: Key action steps to help companies lay the groundwork for effective climate-related disclosures; Ł Good Practice Disclosure: Sample disclosures and accompanying discussion to provide companies with a practical understanding of the four core elements of the TCFD recommendations and their specific disclosures (see Figure 1); and Ł Looking Ahead: A summary of how the CDSB Framework and SASB standards represent a clear solution to TCFD implementation, and areas of future focus.Figure 1. Four core elements of the TCFD recommendations GovernanceStrategy Metrics & Targets Risk Management

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3Introduction In recent years, governments worldwide have rallied around coordinated efforts to meaningfully address climate change. In 2015, the landmark Paris Agreement set the stage for global action. In December 2018, at the Conference of the Parties (COP24) in Poland, nearly 200 nations adopted a firule bookfl to guide individual and collective actions aimed at limiting further warming of the planet, with important implications for both the public and private sectors.Actions like these are driven partly by the potential for threats to human health, infrastructure, natural resources, energy security, and even international order. However, widely-accepted climate scenarios also present a critical economic imperative that cannotŠand, indeed, must notŠbe ignored. fiGoing greenfl is not just a matter of fisaving the planetfl; it is about pursuing economic growth and development that is strategic, resilient, and sustainable. Although the concept of sustainable finance has been embraced by a growing number of market participants and policy makers,2 much work remains to be done. A 2018 Intergovernmental Panel on Climate Change (IPCC) special report on the impacts of climate change found that if greenhouse gas (GHG) emissions continue at their current rate, the Earth™s atmosphere will increase by 1.5°C above pre-industrial levels by 2030. 3 This rapidly-approaching reality far exceeds the goal supported by 184 countries in the 2015 Paris Agreement, which aims to hold the increase in global average temperature to fiwell below 2°C above pre-industrial levelsfl and fipursu[e] efforts to limit the temperature increase to 1.5°C above pre-industrial levels.fl 4 Not only is this future expected to involve potentially catastrophic impacts on agriculture, coastlines, critical ecosystems, and human poverty, it is estimated to come at a global cost of between US$54 trillion and US$69 trillion.5 Conversely, a coordinated global transition to a low-carbon and climate-resilient economy is projected to involve 2 Sustainability Accounting Standards Board (SASB) and Climate Disclosure Standards Board (CDSB), Climate Risk: From Principles to Practice Œ Phase 1 (2018).3 Intergovernmental Panel on Climate Change (IPCC), Global Warming of 1.5°C Œ An IPCC Special Report (October 8, 2018). 4 United Nations, fiParis Agreementfl (December 2015). 5 According to the IPCC report (supra note 3), fiThe mean net present value of the costs of damages from warming in 2100 for 1.5°C and 2°C (including costs associated with climate change-induced market and non-market impacts, impacts due to sea level rise, and impacts associated with large scale discontinuities) are US$54 and US$69 trillion, respectively, relative to 1961-1990.fl significant financial opportunities. For example, a decisive shift could yield economic gains of US$26 trillion over the next 12 years compared to a fibusiness-as-usualfl scenario. 6 An ambitious global response could provide an even stronger basis for economic growth that would generate a GDP increase of fiaround 2.5 percent for the G20 on average in 2050, further increased to about 4.6 percent if avoided climate damages are accounted for.fl 7The sheer scale of the challenge emphasizes the importance of harnessing the power of market forces to drive climate action that aligns the interests of society at large with those of businesses, their investors, lenders, and insurance underwriters. The United Nations Sustainable Development Goals (SDGs) acknowledge the role of market forces. Target 12.6 of SDG12 on Sustainable Consumption and Production encourages ficompanies to adopt sustainable practices and integrate sustainable information into their reporting cycles.fl 8 Indeed, a successful global transition to a more climate-resilient and low-carbon economy will require extraordinary financing 9Šfar beyond what can be harnessed by governments and civil society alone. Global capital markets are therefore critical to making progress on Climate Action (SDG13) and singularly positioned to contribute toŠand benefit fromŠan extraordinary but essential economic evolution.Enter the TCFD Recommendations Recognizing the economic risks and opportunities inherent in a changing climate, the Financial Stability Board (FSB), at the behest of the G20, established the Task Force on Climate-related Financial Disclosures (TCFD) in 2015. The FSB cited the need for consistent, comparable, clear, and reliable corporate disclosure of climate-related information. These disclosures would support informed decision-making by investors, lenders, and insurers in allocating capital and underwriting risk. By developing recommendations for 6 New Climate Economy, Unlocking the Inclusive Growth Story of the 21st Century (August 2018).7 Organisation for Economic Co-operation and Development, Investing in Climate, Investing in Growth (2017).8 CDSB website, fiSustainable Development Goals,fl accessed January 31, 2019, at https:// www.cdsb.net/what-we-do/reporting-regulation/sustainable-development-goals 9 International Energy Agency, Perspectives for the Energy Transition Œ Investment Needs for a Low-Carbon Energy System (2017).

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5time, SASB updated its standards to more fully embrace all aspects of the TCFD guidance.17The shared value of the CDSB Framework and the SASB standards is enhanced by the fact that these initiatives have gained significant traction in global markets. For example, the CDSB Framework is used in 32 countriesŠby 374 companies across 10 sectors with a combined market capitalization of US$5.2 trillion. Further, the Framework is well-recognized in the European regulatory environment, with references in the European Commission™s non-binding guidance on the EU Non-Financial Reporting Directive (fiNFR Directivefl), 18 the UK Companies Act (2006) environmental reporting guidelines, 19 and the London Stock Exchange and Borsa Italiana ESG guidance, among others.20Meanwhile, a growing number of global companiesŠ including S&P 500 firms such as CBRE Group, Digital Realty Trust, General Motors, Host Hotels, Kellogg™s, Kinder Morgan, Medtronic, Merck, Nike, and NRG EnergyŠhave begun to integrate the SASB standards into their financial filings, sustainability reports, and other core communications to investors.21 Likewise, investors have begun to incorporate the SASB standards into their investment analyses and decision-making processes. 22 Since 2016, 40 institutional investors representing a combined US$30 trillion in assets under management have joined SASB™s Investor Advisory Group (IAG). The IAG comprises leading asset owners and asset managers who recognize the need for consistent, comparable, and reliable disclosure of financially material, decision-useful sustainability information for investors. Like the CDSB Framework, the SASB standards have also been recognized by the European Commission as a suitable framework for meeting the five content categories in Articles 19a and 29a of the NFR Directive. 23As standard-setters, stock exchanges, regulators, and policymakers work to shape the future of climate-related and natural capital reporting, companies can leverage the existing SASB and CDSB resources to jumpstart their implementation of the TCFD recommendations. In so doing, they can enhance their understanding, assessment, and management of key climate-related risks and opportunities while also contributing to more efficient, stable, and resilient capital markets. Through the lens of financial materiality, an investment in strategic climate action can bridge the divide between fidoing goodfl and fidoing well,fl not only 17 SASB, Standards Application Guidance (October 2018).18 European Commission, Guidelines on Non-Financial Reporting (June 2017). 19 UK Department for Environment Food & Rural Affairs, Environmental Reporting Guidelines: Including mandatory greenhouse gas emissions reporting guidance (June 2013).20 London Stock Exchange Group, Revealing the Full Picture: Your Guide to ESG Reporting (January 2018). 21 An analysis of SEC ˜lings for ˜scal year 2016 revealed 805 instances of companies disclosing information on SASB metrics across all sectors, including 15 companiesŠmost of them 20-F ˜lers, such as Diageo and Deutsche BankŠthat provided disclosure on at least half of the metrics included in the provisional SASB standard for their industry. 22 SASB, ESG Integration Insights Œ 2017 Omnibus Edition (2017).23 Supra note 18.addressing societal needs, but also creating sustainable, long-term value for companies and their shareholders in the process.

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7Getting Started on TCFD ImplementationLike traditional financial reporting, rigorous climate-related financial disclosures do not happen overnight. The path from start to finish can involve twists and turns, as well as the coordination of many moving parts, thereby requiring the collaboration and expertise of a variety of corporate functions to achieve an organization™s ultimate reporting objectives. This guide recognizes that each organization is unique, starting from its own baseline and possessing its own capacities and processes for robust implementation. Thus, the guide generally covers implementation practices that are likely to vary to some degree based on an organization™s specific characteristics and circumstances, including its size, structure, and/or operating context. Where guidance is presented in an industry-specific context (such as the annotated excerpts of disclosures included in the following sections), corporate professionals will be called upon to exercise their own industry expertise and professional judgment to translate the guidance for their own organization.Laying the Groundwork for Effective Disclosures This guidance is primarily focused on disclosure. However, before meaningful climate-related information can be reported, an organization must first integrate climate assessment, monitoring, and management into its routine business activities. For example, this may involve establishing or refining priorities, policies, processes, and practices related to measuring, assessing, managing, and reporting climate-related financial informationŠfrom strategic planning and enterprise-level risk management (ERM) to internal performance assessments and external reporting cycles. The following checklist, expanded and adapted from CDSB™s 2017 Practical Action TCFD Checklist,24 details many of the key action steps companies can take now to prepare themselves for reporting information that is aligned with the TCFD recommendations (see Figure 4). 24 Adapted from CDSB, TCFD recommendations: a checklist of practical next steps (April 2017).Figure 4. Action Steps to Lay the Groundwork Secure Leadership Buy-InEstablish Committee OversightCollaborate Across FunctionsIntegrate Into ReportingObtain AssuranceImplement Internal ControlSolicit Investor FeedbackUse Existing Tools Adapt ERMPerform Scenario AnalysisAssess Financial Impacts Risk CommitteeAudit CommitteeBeyond TCFDThe action steps outlined here may also be applicable to a wide range of financially material environmental, social, and governance (ESG) matters. For example, figreenfl finance extends well beyond carbon to an array of natural capital and environmental dependencies, and sustainable finance can incorporate a host of issues traditionally considered to be non-financial in nature, such as social and human capital. The CDSB Framework is designed to facilitate effective disclosure of a company™s full spectrum of natural capital, environmental, and climate-related risks and opportunities in the mainstream report. Similarly, and complementary to the CDSB Framework, SASB standards are multi- dimensional, addressing social and human capitals, business model and innovation issues, and leadership and governance matters in addition to environmental and natural capital. The approach described here to lay the groundwork for effective climate-related disclosures may prove useful in integrating these other non-financial issues, as appropriate, into a company™s routine business activities.

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81 Secure the support of your board of directors and executive leadership team.The TCFD recommended disclosures place significant emphasis on the importance of governance, and contain two recommended disclosures related to board oversight of climate-related risks and management™s role in assessing and managing those risks. These governance-related disclosures recognize that effective management of financially material, climate-related risks and opportunities requires direct oversight and executive leadershipŠstarting with the board of directors. Leadership sets the tone at the top to establish key climate-related factors as core business drivers that should be identified, assessed, measured, managed, and reported like any other business-critical issue. 2 Integrate climate change into key governance processes, enhancing board-level oversight through audit and risk committees. What™s new about the TCFD™s work is that it asks boards to understand and integrate climate-related issues into strategic and financial decisions, and to link climate-related information with financial information. A good way to start this process is to identify the CEO, senior executive(s), or board committee(s) responsible for climate policies, strategy, and information, and to define a process for board oversight of these issues.It is also important to engage the risk committee of the organization, as they will already be looking at the financial impacts of external risks on the business. Helping them understand how climate change poses a threat to the organization, considering different time horizons (i.e. short-, medium-, and long-term), is a key step to ensuring disclosures adhere to the TCFD recommendations. Finally, audit committees should scrutinize climate-related financial information with the same rigor they use for financial information. Applying the same process and quality assurance to climate disclosure will make a difference in the way climate risks and opportunities are understood and communicated.3 Bring together sustainability, governance, finance, and compliance colleagues to agree on roles. One of the key goals of the TCFD is to elevate climate-related issues to the board level. But to do this will likely also require integrated management processes to be put in place within an organization.A report by the World Business Council for Sustainable Development (WBCSD) on sustainability and risk management in the corporate sector showed that there is a disconnect between what the sustainability functions in companies consider as material risks for their business and the risks disclosed in the organization™s mainstream financial filings. Indeed, on average, only 29 percent of the areas deemed material in a sustainability report were included in a company™s legal disclosure of risks. Notably, 35 percent of member companies did not disclose any of the sustainability risks identified in their sustainability reports in their legal filings.fl25 As the report further notes, this disconnect is largely due to a lack of cross-functional collaboration, particularly in the identification and evaluation of risks and opportunities. This collaboration can facilitate more effective management of risks, oversight at the board level, and external reporting. 4 Look specifically at the financial impacts of climate risk and how it relates to revenues, expenditures, assets, liabilities, and financial capital.Given the scale, unpredictability, and long-term nature of climate change-related issues, understanding financial exposure can be challenging. The TCFD highlights two primary types of climate risks, which can be mapped to the CDSB Framework and SASB™s climate framework: physical and transitional.26 Physical risks may include extreme weather events, such as drought or flooding, and the longer-term impact of increasing average global mean temperatures. Transitional risks, on the other hand, may include the global transition to a low-carbon economy, new regulations, and innovations in energy efficiency. These risks may have impacts across the entire structure of a business. Revenues may be affected by shifting customer demands and new regulatory requirements, while costs can be impacted by the availability and price of raw materials.Investors and stakeholders need greater clarity on how organizations are assessing these climate-related risks and opportunities, and how they are planning to respond. Understanding and communicating the potential financial impacts of climate-related risks and opportunities will generate more decision-useful information, thereby supporting more informed investment, lending, and insurance underwriting decisions. 5 Assess your business against at least two scenarios.While some businesses are being affected by climate risks today, most are likely to encounter the most significant effects over the medium to long term, with uncertainty related to timing and scale. As the TCFD recommendations stressed, fiscenario analysis is a process for identifying and assessing a potential range of outcomes of future events 25 World Business Council for Sustainable Development (WBCSD), Sustainability and enterprise risk management: The ˜rst step towards integration (2017). 26 SASB, Climate Risk Technical Bulletin (October 2016).

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