FCA Consults on further Climate-related disclosure rules.


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The UK FCA, in furtherance of HMT’s Climate-related roadmap, and following the Climate-related disclosure rules for prominent listed commercial companies, aligned with the recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD), the FCA is consulting on extending this regime to premium listed entities and proposed TCFD aligned disclosures for asset managers (asset managers), life insurers, and FCA regulated pension providers (asset owners).

CP21/17- Consultation closes September 10, 2021

The FCA’s Consultation Paper 21/17 aims to set forth a new framework on ESG for better transparency through a proposed disclosure regime aimed at facilitating consumer decision-making based on the TCFD as an internationally recognised standard. 

3 key outcomes are sought:

  1. Better Outcome for Clients and Consumers- Greater transparency about how firms manage Climate-related risks and opportunities in their investment decisions will help clients and consumers take those factors into account when granting investment mandates and selecting products and hold their providers to account;

  1. Deeper consideration of Climate-related risks and opportunities by in-scope firms to improve investment outcomes for clients and consumers. Better disclosure about how firms are addressing Climate-related risks and opportunities will help markets price assets more accurately and allocate capital more effectively;

  1. Coordinated information flow along the investment chain- appropriate pricing of risks and efficient allocation of capital depends on all parties providing decision-useful information.

The proposals set forth disclosure at entity and product levels as illustrated:

Key elements proposed

Key features proposed relate to TCFD aligned disclosures at both entity and product level equivalent to aspects of disclosure set forth in the EU Sustainable Finance Disclosure Regulations (SFDR).



Disclosure Level



Entity level disclosure

Proposed annual Entity TCFD report on how the Firm takes Climate-related risks and opportunities into account in managing or administering investments on behalf of clients and consumers.




In-scope FCA regulated Firms with regards to assets managed or assets administered in the UK or overseas where done so from the UK.

Product or product-level disclosure

Proposed product level comparable disclosures in respect of products and portfolios including core set of metrics on an annual basis.


Authorised funds (excluding feeder UCITS or feeder AIF / sub-funds in the process of winding up/termination)


Authorised fund is an umbrella fund, each sub-fund of the umbrella is a TCFD product


With-profits fund


Linked fund


Pre-set investment portfolio’s


Certain SIPP structures


Portfolio management mandates


Unauthorized AIF





Who this proposal applies to:

Asset managers

·         Investment portfolio managers

·         UK UCITS Managers

·         Full-scope UK AIF managers

·         Small authorised UK AIFM’s


Asset Owners

·         Life-insurers (including pure-insurers)

·         Non-insurer FCA-regulated pension providers, including platform firms and Self-invested Personal Pension SIPP operators

·         FCA-regulated pension providers


Proposals do not apply to below threshold entities

Asset managers or asset owners with less than GBP5 billion in AUM or AUA relating to relevant activities on a 3 year rolling average are to be excluded from the proposed change


Overseas firms, including those under the Temporary Permissions Regime (TPR) are to be excluded from the proposed change


Defined Benefit (DB) Schemes are excluded as they fall under the DWP’s regulations.


Financial Risks of Climate change

The Financial risks associated with Climate change are commonly categorized as:


·         Physical Risks- impact as a result of extreme weather events leading to business disruption and financial losses, impact on portfolio value.


·         Transition Risks- impact of policy, technological advancements, market and behavioural implications affecting operating models.


An assessment with scenarios and realistic outcomes should be considered in Entity and Product & Portfolio level disclosures.


Entity Level Report

TCFD Entity Level Report & Senior Management Compliance statement

The FCA proposes that, Entity level report should follow the guidelines and recommendations of the TCFD with flexibility to cross-refer to disclosures made in other reports covering the requisite content to avoid duplication. This flexibility would be applicable:


·         Disclosures are made as part of a group report;

·         Disclosures are made as complementary to the annual financial report;

·         Investment decisions are taken by another entity in the same group or a delegated manager


The Firm’s own TCFD Entity Report must make clear reference to the cross-referred material and the rationale and basis for relying on such data.


It is proposed that Senior Management sign the report to confirm its adherence to the FCA Handbook


TCFD Entity Level Report- Contents

The FCA is further proposing that the report should include or address:


·         Governance, Strategy and Risk Management;


·         Scenario analysis to consider the potential scenarios, outcomes and implications of Climate related financial risks


·         Metrics and Targets information where the Firm has set Climate-related targets and KPI’s in relation to those targets


·         Product or Portfolio level information in the case where the Firm manages a listed unauthorised AIF to be included in the Entity Level Report


Authorised Fund Manager (AFM) and delegated arrangements, including host AFM’s

The FCA proposal clarifies that the Authorised Fund Manager (AFM) will be responsible for producing the TCFD Entity level report, unless part of a group where such a report can be referenced back to a group level report.


Where a host AFM is used which delegates portfolio management to a 3rd party manager, the AFM remains responsible for producing the TCFD Entity level report including the signed compliance statement.


The FCA also proposes some degree of flexibility for such AFM’s to include hyperlinks and cross-references in their TCFD Entity Report to relevant Climate-related disclosures made by delegated managers.


The AFM must also disclose the rationale for selecting the delegate taking into account how climate change matters in such selections has been considered with regards to the underlying products or portfolios. 


Product or Portfolio Level Disclosures

Product or Portfolio level disclosures


The FCA proposal with regards to disclosure at the product or portfolio level is that such disclosure should be made prominently on the Firms website in an appropriate form of client communication. Such disclosure should include:

·         Annual long report or half-annual report of an authorised fund, provided that the disclosures are always included in the annual report;

·         Periodic client report;

·         An annual report to with-profits policyholders;

·         An annual pension benefit statement or pension drawdown statement;

·         Flexibility to cross- refer to the disclosure by 3rd party portfolio managers where management has been delegated, and disclose any material deviations



On Demand Reports

Public disclosure of such reports may not be appropriate in the following cases, and therefore on demand reports should be available:


·         Investment portfolio managers in respect of discretionary portfolio management services;


·         Full-scope UK AIFMs or small authorised UK AIFMs in respect of non-listed unauthorised AIFs


The respective report must be made available to clients upon request, once a year.


Provision of data on underlying holdings

Firms should provide data on the underlying holdings of their product to clients that request it to satisfy their own Climate-related financial reporting obligations.

Content of Product or portfolio level reports

The FCA is proposing baseline core, mandatory, carbon emissions and carbon intensity metrics to be disclosed. This is similar to the calculations and metrics set out in the EU SFDR.


The recommended content is as follows:

·         Core Metrics

o    Scope 1, 2 & 3 GHG Emissions

o    Total Carbon Emissions

o    Carbon Footprint

o    Weighted Average Carbon Intensity (WACI)



·         Additional Metrics

o    Climate VAR

o    Climate warming scenario’s

o    Other metrics – refer to CFRF guidelines


·         Target information where the Firm makes claims about Climate-related targets


·         Governance, Strategy and risk management in the Entity Level report may be relied upon, unless there are product or portfolio level differences required to be disclosed;


·         Scenario analysis


Additions to the FCA Handbook

Environmental, Social and Governance Sourcebook (ESG) to be added to the Business Standards of the FCA Handbook after Product Intervention and Product Governance sourcebook.




Level of Disclosures



Location of Disclosure

Implementation & Publication Schedule

Entity Level


TCFD aligned report disclosing how Climate-related risks and opportunities are considered when managing or Administering investments on behalf of clients and consumers

Prominent place on the main website covering the entity level approach to all assets managed by the Firm in or from the UK (including overseas products and portfolio’s)

Phase 1- Effective 1 Jan 2022-

1st Publication June 30, 2023

Applies to:

• Asset Managers with AUM of GBP50 billion

• Asset Owners- AUA GBP 25 billion

Phase 2- Effective Jan 1, 2023 – 1st Publication June 30, 2024

•   Applies to in-scope Asset Managers and Asset Owners with AUM or AUA of at least GBP 5 billion or more


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