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UK consultation on climate-related financial disclosures by asset managers, life insurers and FCA regulated pension providers

  • United Kingdom
  • ESG
  • Financial services and markets regulation - ESG
  • Investment funds and asset management
  • Financial services


In consultation paper CP21/17 the FCA is consulting on “Enhancing climate-related disclosures by asset managers, life insurers, and FCA-regulated pension providers”.  The FCA proposes that in scope companies and LLPs will be subject to a mandatory requirement to disclose climate-related financial information in line with the four overarching pillars of the task force on climate-related financial disclosures (“TCFD”) recommendations.  The FCA recognises that firms are facing a plethora of reporting regimes (notably the Sustainability Finance Reporting Directive (“SFDR”)).  Taking into account the other regimes to which firms may be subject, the FCA proposals focus on regulatory outcomes.  Those familiar with SFDR will recognise the disclosure regime framework proposed by the FCA, with requirements for disclosure at both entity level and product level.

The FCA will create a new Sourcebook, the “Environmental Social and Governance (“ESG”) Sourcebook”, which will develop over time.  The FCA expects the regime to be proportionate, promote increased transparency and to enable clients and consumers to make considered choices.

The proposals are the latest step in the UK Government’s Green Finance Strategy.  Previous measures proposed under the Green Finance Strategy include requiring all listed companies and large asset owners to disclose in line with the TCFD recommendations by 2022.

In November 2020 the Government announced its intention to make it mandatory for large UK companies and financial institutions to make TCFD aligned climate-related disclosures by 2025.  Following a consultation to determine which UK companies will be subject to the new requirements, changes to companies legislation will be implemented in 2022.

The Consultation closes on 10 September 2021.

See our related client briefings:

What are the requirements?

Like the SFDR, the disclosures are to be made at two levels:

  • Entity level – firms will be required to publish an entity level TCFD report on how climate related risks and opportunities are taken into account in managing or administering investments.  These disclosures must be published in a prominent place on the entity’s website;
  • Product level – an annual set of baseline consistent comparable disclosures relating to the products, including a core set of materials, which are either:
  • published in a TCFD product report on a website and also sent to clients in an appropriate client communication; or
  • available on request by institutional clients.

Which firms are in scope?

The Consultation Paper covers the following firms in relation to any assets managed or administered from the UK, regardless of where clients are located.

Entity Level requirements


Asset managers – including investment managers, UCITS management companies and full scope and small UK AIFMs and investment advisors - where the advice is given to institutions in a group in which substantive investment decisions are based on the advice.  Firms in the TPR will not be in scope until they receive FCA authorisation.

Asset owners – life insurers in relation to insurance based investment products and defined contribution pension products and non-insurer FCA regulated pension providers (for example self-invested pension plan (“SIPP”) providers).  Defined benefit pension schemes are not in scope as they are subject to DWP Regulations.

Only firms with more than £5 billion in AUM over a 3 year period will be in scope.

Product level


-       authorised funds (but not feeder funds or funds subject to winding up or being terminated)

-       AIFs

-       portfolio management services

-       insurance based defined contribution pension schemes

-       non-insurance defined contribution pension schemes

-       SIPPs


What are the TCFD recommendations?

The TCFD recommendations are regarded as one of the most effective frameworks for companies to analyse, understand and ultimately disclose climate-related financial information.

The TCFD was established in December 2015 by the Financial Stability Board to develop a set of voluntary climate-related disclosure standards for companies across all sectors.  The Recommendations of the Task Force on Climate-related Financial Disclosures were published in the final report in 2017 to help businesses disclose climate change risks.  The recommendations constitute climate-related financial risk disclosures for use by companies in providing information to investors, lenders and insurance underwriters about the financial risks companies face from climate change.  The core elements of climate change disclosures recommended by the TCFD are structured around four pillars as set out below: governance, strategy, risk management and metrics and targets, with 11 specific recommended disclosures which sit under the four pillars.

What is the timeline?

The FCA recognises that firms have a lot to do in this area and are proposing a staggered implementation timeline:

From 1 January 2022:

-       asset managers with AUM over £50 billion;

-       asset owners with AUM of £25 billion or more.


Entity Level

These firms will be required to report by 30 June 2023 in relation to activities over the previous 12 months, starting with a period commencing no earlier than 1 January 2022.

Product Level

Again, the disclosures will need to be made and posted on the website by 30 June in each year and must be calculated with respect to the 12 month period covered by the TCFD entity report.  Details must be communicated to investors in the first following client communication, which might be the annual or interim financial report, a periodic client report, annual report to with-profits holders or an annual pension benefit statement or pension drawdown statement.  For firms which manage unauthorised AIFs, the product disclosure must be in the TCFD entity level report. 


From 1 January 2023


Firms above the £5 billion threshold but not in the first phase will be required to publish their relevant disclosures by 30 June 2024.


What are the entity level disclosure requirements?

The FCA recognises the fact that asset managers and assets owners are often global businesses and will be making disclosures not only about UK assets managed in the UK but also overseas assets managed or administered outside the UK.  They are using the TCFD principles based approach as the basis for entity level disclosures.  This is to ensure that the UK is in line with the approach gaining global recognition and that the approach to asset management is aligned to the approach the DWP take in relation to pensions to ensure there is a consistent approach along the value chain.

In scope firms must produce and publish on their website a report which accords with the TCFD recommendations each year by 30 June.  The FCA has built some flexibility and proportionality into the requirements.  Key headlines include:

  • the report will be able to cross refer to other documents, including other climate disclosures by the firm or group-wide TCFD reports, although the firm will need to set out its rationale for doing so and how any disclosures made at group level are relevant to its own activities
  • a senior manager from the firm must sign off the report, confirming the disclosures comply with the relevant requirements, including the TCFD all sector guidance and the specific guidance for asset managers and asset owners
  • a firm which delegates investment management will remain responsible for the TCFD entity level report and will need to include reasons for the delegation and how climate related matters have been taken into account when choosing the delegate.  It will be possible to include links to disclosures made by the delegated managers where appropriate
  • asset owners will be responsible for the TCFD entity report if they act as manager or administrator of underlying assets for customers and will have to include detail of how climate related considerations have influenced the appointment of asset managers, their judgment on the range of funds to offer to clients and how these judgments reflect the firm’s overarching climate change strategy

What are the product or portfolio level disclosure rules?

To ensure comparability of product and portfolio level disclosures, the FCA proposes a baseline set of disclosures and metrics for firms.  Firms will be able to link to disclosures made by delegated investment managers as relevant, provided they provide an explanation of why this is appropriate and of any material deviations from the disclosures made by the delegate.  Key headlines include:

  • firms will be required to provide data on the underlying holdings of their products to allow their clients to satisfy their own climate related financial reporting obligations
  • the FCA has recognised that in some cases it may not be appropriate to produce public reports (discretionary mandates, AIFMs of unlisted, unauthorised AIFs) and so the proposals include a mechanism for disclosures to be made privately, once a year and in accordance with minimum standards
  • the metrics required by the FCA are a sub-set of the TCFD metrics, with which some firms will already be familiar either from TCFD or the SFDR, although the requirements are not an exact replica of the SFDR requirements.  The FCA will be requiring calculations to be made under both regimes, where there is a difference, to ensure comparability across UK and EU products
  • a narrative providing context and an explanation of how the metrics should be interpreted must be provided
  • in addition to the core metrics, firms must provide supplemental information on forward looking metrics on a best efforts basis
  • firms must provide details of any gaps in the data and whether they have used assumptions and proxies to fill such gaps
  • it is likely that the final rules will reference the TCFD’s Portfolio Alignment technical supplement which is currently subject to a public consultation, which closed on 7 July 2021
  • if a product includes a climate-related target then firms will need to formulate KPIs to measures progress against the targets in accordance with the TCFD recommendations
  • the FCA recognises the difficulties for asset owners of producing disclosures at product level for products which have different components on an investor by investor basis.  They propose a flexible approach to allow the disclosures to be made at pre-set investment portfolio level or individual fund level

TCFD pillar

High Level Requirement

CP 21/17 Requirements at Entity Level

CP 21/17 Requirements at Product Level


Disclose the organisation’s governance of climate-related risks and opportunities.

The FCA recognises firms will have a broad spectrum of asset classes, investment strategies and products.  Accordingly firms may report on a broad basis or may choose to tailor the disclosures to relevant strategies, assets and products.  The FCA proposes that, if relevant, firms highlight the material differences in their approaches to governance, strategy or risk management for different strategies, assets and products.

Firms must disclose:

  • their approach to climate related scenario analysis
  • how they apply the scenario analysis in investment decision making
  • quantitative examples to demonstrate their approach to scenario analysis where possible

The Rules recognise that if an overarching approach to governance strategy and risk management (which applies broadly across all products, asset classes and investment strategies) is set out in the entity level report then those disclosures will satisfy the product level disclosure requirements.  If the product approach materially deviates from the overarching approach this must be set out.  Firms will need to look at the TCFD’s product related guidance to determine what extra disclosure may be required. 

The FCA is seeking views on whether firms should be required to produce quantitative scenario analysis.  This may particularly assist pension fund trustees, who are being encouraged by the DWP to  move to quantitative analysis.


Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning if such information is material.

Risk Management

Disclose how the organisation identifies, assesses and manages climate-related risks.

Metrics and Targets

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities if such information is material.

The metrics relate to greenhouse gas emissions, total carbon emissions, total carbon footprint and weighted carbon intensity.

If a firm has set a climate related target, the firm must disclose the target, including the KPIs it uses to measure its progress.  If a firm has not set a target it will need to explain why not.


For more information on how the disclosure regulation may impact you, get in touch