You will no doubt have seen my colleague Jess Arrol Caws’ excellent passle on the FCA’s recent consultation paper and its proposals to introduce climate-related financial disclosure rules for asset managers, life insurers and FCA regulated pension providers.

These disclosure rules are intended to be aligned with the Financial Stability Board’s (FSB) Taskforce on Climate-related Financial Disclosures (TCFD).

It therefore seemed an opportune moment to remind ourselves who the TCFD is and what it has produced to date.


The TCFD was established in 2015 by G20 Finance Ministers and Central Bank Governors within the FSB. Mike Carney, Governor of the Bank of England at the time, famously introduced the concept of the “tragedy of the horizon” and noted that by the time climate change becomes a defining issue for financial stability – it might be too late to do anything about it. Accordingly, the TCFD’s primary focus was placed on addressing the ramifications on the climate resulting from the misallocation of capital and mispricing of assets.

With this fundamental focus in mind, the TCFD published a report in June 2017 setting out 11 recommended climate-related financial disclosure obligations – sat under 4 key pillars:

  1. Governance: aimed at providing an insight into an organisation’s internal operations, policies and governance around climate-related risks and opportunities;
  2. Strategy: an assessment of the actual and potential impacts of climate-related risks and opportunities on a company’s business, strategy, and financial planning;
  3. Risk Management: to provide an understanding of the processes used by an organisation to identify, assess, and manage climate-related risks; and
  4. Metrics and Target: providing mechanisms and goals that provide tangible feedback on the effectiveness of a company’s strategy to mitigate climate-related risks.

Full details of the recommendations are set out here.

This framework is intended to satisfy two stated key objectives:

  • to influence internal decision-making within organisations regarding the identification, assessment and management of climate-related risks and opportunities, thereby strengthening policies, programmes, practices and behaviours; and
  • to ensure that the climate-related financial information disclosed is decision-useful for financial market participants, especially investors, lenders and insurance underwriters.

What does this mean in practice?

To report in line with the TCFD recommendations, a company will need to conduct a comprehensive climate change risk and opportunity assessment that:

identifies all actual and potential climate change risks and opportunities to the business, whether legal, reputational, market-related and/or physical: and

evaluates their impact on business, strategy and financial planning.

The above will need to be fundamentally integrated into an organisation’s mainstream risk assessment processes with oversight from the board. Having identified and evaluated the impact on the business of climate risks and opportunities, companies will be required to implement appropriate mitigation and management measures, including setting relevant targets.

What comes next?

Historically, the implementation of TCFD recommendations has been a voluntary step for UK companies and any implementation is generally a reactionary step in response to stakeholder, shareholder and investor pressure.

This is set to change.

In December 2020, the FCA published a policy statement confirming that, under a new Listing Rule (in LR 9.8), commercial companies with premium listings (i.e. those UK public companies that comply with UK’s highest standards of regulation and governance) must state in their annual reports for accounting periods beginning on or after 1 January 2021 whether they have disclosed in line with the TCFD’s recommendations. To the extent they have not, they must explain why and describe the steps that they will take in order to make the relevant disclosures in the future and the associated timeframes.

My colleague Victoria Younghusband has written in more depth specifically on this new listing rule - see here.

Furthermore, the current roadmap suggests that, during 2021, TCFD-aligned disclosures will become mandatory for (i) occupational schemes with over £5bn in net assets; (ii) banks, building societies and insurance companies; and (iii) premium listed companies. By 2022, (i) occupational schemes with over £1bn in net assets; (ii) all standard listed UK companies (as outlined in the FCA Consultation Paper CP21/18); (iii) large UK private companies and LLPs (i.e. those that have more than 500 employees and a turnover of more than £500m); and (iv) large UK UK-authorised asset managers, life insurers and FCA-regulated pension providers (as outlined in the FCA recent consultation paper - see FCA Consultation Paper CP21/17) - will also be added to the list.


Since their initial 2017 report, the TCFD have issued three further status reports – each concluding that there has been significant momentum around the adoption of and support for its recommendations.

This should come as no surprise. Investor demand for companies to report information in line with the TCFD recommendations has grown dramatically and this is reflective of a noticeable shift in attitude and preferences by stakeholders and investors - who now place a level of importance on ESG principles (and companies’ adoption of the same) that has not been seen before. As a general rule, the Covid-19 pandemic has only accentuated this. For a detailed assessment and analysis on the part that ESG plays in investor/stakeholder thoughts, please see our White Paper which we have published jointly with IQ-EQ, "ESG – Searching for substance behind the acronym".

The upshot of all this? Times are changing quickly. In 2017, TCFD released a set of “recommendations”. These will shortly become “obligations” and companies will need to adjust their financial reporting accordingly.