Publication
International Restructuring Newswire
Welcome to the Q2 2025 edition of the Norton Rose Fulbright International Restructuring Newswire.
Asset managers and the Task Force for Climate-related Financial Disclosures
Global | Publication | March 2021
Content
Introduction
The Task Force for Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board (FSB). It established the TCFD to develop recommendations for more effective climate-related disclosures that could promote more informed decisions and enable stakeholders to better understand concentrations of carbon-related assets in the financial sector and exposures to climate-related risks.
The TCFD has four core elements:
- Governance.
- Strategy.
- Risk management.
- Metrics and targets.
Beneath these four elements there are eleven supporting recommended disclosures that provide further detail on the information to be disclosed.
When do the requirements become mandatory?
In its Green Finance Strategy last year, the UK government set an expectation that all listed issuers and large asset owners (among others) would be disclosing in line with the TCFD recommendations by 2022.
On 9 November 2020, HM Treasury published an indicative “Roadmap” for the introduction of mandatory TCFD-aligned disclosure standards by 2025. This provides a waterfall for the planned implementation of regulatory actions and legislative measures across different businesses as follows:
| Year | Timeline of planned or potential regulatory actions or legislative measures |
|---|---|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024-25 |
|
How can I practically seek to implement the recommendations across my business?
Set out in the table below are some practical insights and perspectives for organisations to consider. We have aligned these to each of the eleven recommended disclosures across the four core TCFD elements.
| TCFD Core Element |
Recommended Disclosure |
Practical Considerations |
|---|---|---|
| Governance |
“Describe the board’s oversight of climate-related risks and opportunities” |
|
|
“Describe management’s role in assessing and managing climate-related risks and opportunities” |
|
|
| Strategy |
“Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term” |
|
| “Describe the impact of climate-related risks and opportunities on the organisation’s business lines, strategy, and financial planning” |
|
|
| “Describe the resilience of the organisation’s strategy, taking into consideration a 2°C or lower scenario” |
|
|
| Risk Management |
“Describe the organisation’s processes for identifying and assessing climate-related risks” |
|
|
“Describe the organisation’s processes for managing climate-related risks” |
|
|
| “Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management” |
|
|
| Metrics and targets | “Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process” |
|
| “Disclose scope 1 (all direct emissions), scope 2 (indirect emissions from electricity purchased and used) and (if appropriate) scope 3 (all other indirect emissions) greenhouse gas (GHG) emissions and related risks” |
|
|
|
“Describe the targets used by the organisation to manage climate-related risks and opportunities” |
|
|
Key actions and next steps in the UK
In respect of implementing the TCFD recommendations in the UK, for accounting periods beginning on or after 1 January 2021, companies with a UK premium listing are required to include a compliance statement in their annual financial report stating whether they have made disclosures consistent with the TCFD recommendations. Where disclosures are not consistent with TCFD recommendations, such companies will be required to explain these inconsistencies.
The FCA also plans to separately consult on potential client-focused TCFD-aligned disclosures by UK-authorised asset managers, life insurers and FCA-regulated pension providers and other persons in 2021.
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