PIMFA
The Task Force on Climate-Related Financial Disclosures
The Task Force on Climate-Related Financial Disclosures (TCFD) was created in 2015 by the Financial Stability Board. It developed recommendations for companies to disclose how they manage the financial risks and opportunities that climate change poses to their business. The TCFD recommendations have received widespread acceptance and are applied by companies around the world. In November 2020, the Chancellor announced that the UK intends to make TCFD-aligned disclosures fully mandatory across the UK economy by 2025.
Since then, the government and regulators have made significant progress towards this ambition:
- In December 2020, the Financial Conduct Authority (FCA) finalised its TCFD-aligned disclosure rules for UK premium-listed companies.
- In March 2021, the Department for Business, Energy, and Industrial Strategy (BEIS) consulted on mandatory climate-related financial disclosure requirements for certain publicly quoted companies, large private companies, and Limited Liability Partnerships. The consultation closed in May.
- In June 2021, the FCA consulted on proposals to extend its TCFD requirements to standard-listed issuers and to require UK-authorised asset managers, life insurers and pension providers to publish client-focused TCFD-aligned disclosures.
- In July 2021, the Department for Work and Pensions (DWP) laid legislation before Parliament requiring a variety of pension schemes to make certain TCFD disclosures and effectively manage climate-related risks and opportunities.
The rules apply from 1 January 2022 for the largest firms with more than £50 billion in assets under management. The first reports are due by 30 June 2023, reflecting the 2022 calendar year. Firms with assets under management of more than £5 billion will apply the new rules from 1 January 2023, with reports for calendar year 2023 due by 30 June 2024.
New rules require in-scope firms to make disclosures on an annual basis at:
- Entity-level – an annual TCFD entity report published in a prominent place on the main website of the firm’s business setting out how they take climate-related matters into account in managing or administering investments on behalf of clients and consumers
- Product-level – disclosures (including a core set of climate-related metrics) on the firm’s products and portfolios made publicly in a prominent place on the main website of the firm’s business and included or cross-referenced in an appropriate client communication, or made upon request to certain eligible institutional clients
SDR builds on the UK’s TCFD implementation. The aim is for SDR to be a fully integrated regime that works smoothly across all sectors of the economy. Within that, relevant regulators and government departments will determine the precise scope and timing of requirements, and the reporting detail, subject to relevant consultation processes and other statutory requirements.
On 17 December 2021 the FCA published its Policy Statement (PS21/24) confirming final rules and guidance regarding the requirements under a new climate-related disclosure regime for asset managers and asset owners consistent with the Recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). In this Policy Statement, the FCA also confirmed it was introducing a new ESG Sourcebook to the FCA Handbook.
