Unpacking the IA's position
The Task Force on Climate-related Financial Disclosures (TCFD) was created to improve and increase reporting of climate-related financial information.
Reporting in line with TCFD generates a key mechanism through which investment managers can enhance their understanding of how companies are managing climate-related risks. The four pillars of TCFD include: governance, risk management, strategy, metrics and targets.
To help play our part in this all important process, the IA has set up a dedicated working group – the TCFD Disclosures for Investment Managers’ working group – in order to ensure the IA can deliver on our industry commitments set out in our Climate Change position paper. The IA remains committed to supporting members to developing a full set of TCFD disclosures at entity level in the 2021/22 reporting round.
Earlier this year, the FCA published two consultations: CP21/17 & 18, in order to expand mandatory TCFD reporting. The FCA also published consultation CP21/ 17, which sought to develop a pan-industry reporting template. This would therefore enhance climate-related disclosures on both entity level and product/portfolio level for asset managers, life insurers and FCA regulated pension schemes. Under the updated proposals:
It is important that asset managers are aware of how these changes will impact their businesses and ensure they are prepared. The FCA is proposing to phase in these rules, starting with the largest most interconnected firms with effect from the start of next year, bringing in the remainder of firms into scope a year later. Firms with less than 5 billion AUM would be outside of the rule at the moment, but once fully implemented, the proposed rule is expected to cover some 98% of AUM by FCA regulated asset managers and asset owners. The FCA has advised that it has approached the design of these rules with international consistency in mind.
The IA’s dedicated TCFD working group will be our main point of contact for responding to the FCA's consultation, with final sign off from our Sustainable and Responsible Investment Committee before the 10th September deadline. For more information, please contact Daryl Kennedy on: daryl.kennedy@theia.org