FCA’s consultation on TCFD reporting: Long-awaited details revealed

FE fundinfo's Bates takes a look at the FCA consultation paper on TCFD requirements

A week before July, the Financial Conduct Authority (FCA) published its promised consultation paper (CP) on Task Force on Climate Related Financial Disclosures (TCFD) aligned reporting for asset managers, life insurers and regulated pension providers.

There are some positive noises coming out of the consultation, such as the ambition to create some degree of consistency with the EU Sustainable Finance Disclosure Regulation (SFDR) and the Department for Work and Pensions (DWP) obligations for occupational pension schemes from October this year, as well as the TCFD.  The purpose of the CP is to deliver what the FCA calls “decision-useful disclosures” to institutional clients and retail consumers and to enable investors to hold their asset managers to account.

The FCA’s approach

The FCA is sticking to its usual approach of principles-based regulation, rather than the EU’s preferred rules-based approach that sets out every box that needs to be ticked.  As the FCA says, it aims to enable investors to make considered choices, while also being proportionate, bearing in mind that the requirements will apply only to asset managers and asset owners with over £5bn AUM/AUA.

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Similar to the SFDR requirements, the FCA has set out disclosures at the entity level and the product/fund level.  Both must be posted on the company website.  Product-level disclosures must also be included in “appropriate” client communications, which could be the annual report, annual pension statement or another periodic client report.

At the entity level, firms must report how they take climate-related risks and opportunities into account on behalf of their client assets, including governance, strategy, risk management, metrics and targets.  Product-level disclosure consists of a baseline set of mandatory carbon emissions and carbon intensity metrics and any governance, strategy or risk measures that differ from the entity level disclosure.  Both levels must also undertake scenario analysis.

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The metrics and targets are expected to be consistent with the “net-zero by 2050” target and the CP notes the metrics and targets set out by the TCFD.  Firms must describe the target they set themselves, including any KPIs it uses to measure progress against the TCFD report.  Any firms that haven’t set out climate-related targets will need to explain why not.

Product level metrics include the core metrics of greenhouse gas emissions, total carbon emissions, the carbon footprint and weighted average carbon intensity, and the CP sets out methodologies for some of these, while also acknowledging the possible difficulty with data availability.


Implementation of the FCA’s plans will be phased, with asset managers of over $50bn and asset owners with over £25bn being caught in the first phase starting on 1 January 2022, with the first publication deadline of 30 June 2023.  The second phase, for smaller firms, comes in on 1 January 2023, with reporting by 30 June 2024.

The FCA notes up front in the CP that the climate focus is narrower than it needs to be over the long term and expects its ESG Sourcebook to expand to include rules on both other climate-related and non-climate ESG topics. An acknowledgment of sorts then that the TCFD does not yet cover the ‘S’ and the ‘G’ of ESG regulations.

The consultation continues to 10 September, with a policy statement expected from the FCA in the fourth quarter of this year.

Mikkel Bates is regulations manager at FE fundinfo and an ESG Clarity editorial panellist.