CP21/17 Climate Related Disclosures – Overview and Timeline

The aim of the new disclosure rules is to enhance transparency and enable clients and consumers to make considered choices, while remaining proportionate for firms. The UK Government have agreed to match the ambitions of the EU Sustainable Finance Action Plan, of which the EU Sustainable Finance Disclosure Regulations (SFDR) forms part of.


Who the disclosures apply to:

The FCA’s proposed climate-related financial disclosure rules apply to asset managers, life insurers and FCA-regulated pension providers.

Type of firms within the scope of the disclosure rules at entity-level are:


Asset managers Life insurers and FCA-regulated pension providers
Investment portfolio managers Life insurers (including pure reinsurers) in relation to insurance-based investment products and defined contribution (DC) pension products
UK Undertakings for Collective Investment in Transferable Securities (UCITS) management companies Non-insurer FCA-regulated pension providers, including platform firms and Self-invested Personal Pension (SIPP) operators, to the extent that SIPP operators provide a ready-made selection of investments
Full-scope UK Alternative Investment Fund Managers (AIFMs)
Small authorised UK AIFMs


Target audience for disclosures are:

  • Investors, including institutional clients (eg, pension scheme trustees, employers, corporate investors)
  • End-user consumers (eg, pension scheme members, retail investors).


Entity-level disclosures

Firms would be required to publish, an entity-level report on how they take climate-related risks and opportunities into account in managing or administering investments on behalf of clients and consumers. This is based on the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations. The TCFD entity report will need to be published on an annual basis by 30 June each calendar year.

The purpose of these requirements is to provide clients and consumers with information to understand the firm’s approach to climate-related risks and opportunities and enable them to make informed decisions when granting mandates and selecting providers.

As each in-scope firm will be required to publish a TCFD entity report, the contents of the report must be consistent with the TCFD’s recommendations. The contents of the TCFD entity report will include: governance, strategy (including scenario analysis), risk management and metrics and targets. These disclosures must be published in a prominent place on the main website for the firm’s business.

Contents of TCFD entity report

Firms must explain any material differences in their approach to governance, strategy and risk management for specific investment strategies, asset classes or products, where relevant.

Depending on the number and nature of the firm’s different investment strategies, asset classes or products, a firm may make more tailored disclosures or highlight material differences within its product or portfolio-level disclosures. However, where this is the case, the firm must include a cross-reference so that the disclosures are easily accessible from the TCFD entity report.

Scenario Analysis: The aim of a Scenario Analysis is to analyse the plausible and hypothetical future outcomes that can occur based on a set of assumptions and constraints. A Scenario Analysis essentially helps clients and consumers better understand the potential impact climate-related risks will have over time.

Metrics and Targets: The FCA considers it appropriate that firms not yet setting climate-related targets must explain why not – some firms may not set such targets at the entity level due to the particular profile of their business or client base. However, consistent with the TCFD’s recommendations, where a firm has set a climate-related target, the firm must describe the target, including the key performance indicators (KPIs) it uses to measure progress, in its TCFD entity report.


Specific proposals for asset managers

Where an in-scope firm is an Authorised Fund Manager (AFM), it may delegate investment management to a third-party portfolio manager which is not in the same group (often as part of a host AFM arrangement). In this case the AFM will remain responsible for producing a TCFD entity report (not the delegated manager). This report will still need to set out the AFM’s approach to the TCFD’s recommendations, including a signed compliance statement. The AFM must also briefly explain the reasons for selecting the delegated manager. This explanation must include how climate-related matters have been taken into account in selecting delegates and relying on their products and services.

 Compliance statement: The TCFD entity report will need to include a statement confirming the disclosures comply with the requirements set out in the relevant chapter of the FCA Handbook. The compliance statement will need to be signed off by a member of senior management.


Portfolio/Product-level disclosures

Firms will be required to produce a minimum baseline set of consistent, comparable disclosures in respect of their individual products and/or portfolio management services, including a core set of metrics (mandatory carbon emissions, carbon intensity metrics, additional metrics and scenario analysis).

Firms would then be required to publish portfolio or product-level disclosures in a TCFD product report on an annual basis by 30 June each calendar year, which must be published in a prominent place on the main website for the firm’s business using the most up-to-date data at the time of reporting. To avoid duplicative disclosures and an increased burden on firms, relevant product level disclosures can be cross-referenced and/or hyperlinked, in an appropriate client communication, or be made upon request to certain eligible institutional clients once a year.

These disclosures will need to be in the appropriate form of client communication such as:

  • the annual long report or half-annual report of an authorised fund, provided that the disclosures are always included in the annual report
  • a periodic client report
  • an annual report to with-profits policyholders
  • an annual pension benefit statement or pension drawdown statement

Firms that manage a listed unauthorised AIF must include their product or portfolio-level disclosures in the TCFD entity report.

Provision of data – Additionally, in-scope firms should provide data on the underlying holdings of their products to clients who request it in order to satisfy their own climate-related financial reporting obligations.

The purpose of these requirements is to provide clients and consumers with reliable information about the assets to which they have economic exposure. This will enable them to make informed decisions about their investments and hold their providers to account.


Content of product/portfolio level disclosures

Core metrics: Table 1 shows a list of the core metrics that are listed in the TCFD’s recommendations. The FCA propose that all metrics are to be supported by contextual information to explain how they should be interpreted and any limitations. This aims to ensure that all disclosures are fair, clear and not misleading. This is particularly important where assumptions and proxies have been used to address data gaps. Additionally, metrics are to be accompanied by a historical time series for comparison, after the first year that product or portfolio-level climate disclosures are reported in accordance with the FCA’s rules.

Metric Proposal
Scope 1 and 2 Greenhouse gas (GHG) emissions These metrics are widely used in the market, including as part of disclosure regimes in the UK and internationally.

The FCA propose to mandate this metric from when the proposed rules enter into force.

Scope 3 GHG emissions Although this is a widely recognised metric, the FCA acknowledge that methodologies differ and there may be significant data gaps among investee companies, at least in the short term until the implementation of further disclosure requirements in the UK and internationally.


The FCA are proposing that firms should disclose Scope 3 emissions from no later than 30 June 2024. This is 1 year later than the deadline for the first disclosures in accordance with the rest of their proposals.

*Total carbon emissions As total carbon emissions are the sum of the GHG emissions referenced above, the FCA considers it appropriate to mandate that this metric be disclosed to the same timeframes. Scope 3 emissions would therefore need to be included in the total figure from 30 June 2024.
*Carbon footprint This is a widely used metric in the market. The regulator proposes that this be disclosed on a mandatory basis from when our proposed rules enter into force.
*Weighted average carbon intensity (WACI) In its final report, the TCFD acknowledged limitations with this form of carbon footprinting due to data availability. As such the TCFD is currently proposing that asset managers and owners should disclose a financed emissions metric based on WACI and the Partnership for Carbon Accounting Financials (PCAF) methodology, if relevant, or a comparable methodology.

The PCAF provides methodologies for asset managers, asset owners and banks to measure or estimate financed emissions for different asset classes. It also provides for alternative solutions when data is not available.


Additional metrics are provided below to supplement the core metrics and are most likely to be decision-useful to clients and consumers.

Metric Rationale
Climate Value-at-Risk (VaR) Climate VaR could be a useful metric for assessing the potential future financial impact of a product’s or portfolio’s climate exposure. It may be particularly helpful for institutional investors that are subject to their own regulatory obligations, particularly in supporting scenario analysis.

It may also help to disclose the outcome of scenario analysis to retail investors in a more accessible way.

Metrics that show the climate warming scenario with which a product or portfolio is aligned e.g., Implied Temperature Rise These metrics provide a forward-looking view of a product’s or portfolio’s carbon exposure. They could provide useful visibility over the progress funds are making towards any climate-related targets they have set.
Other metrics Consistent with the TCFD’s supplemental guidance, firms should provide other metrics that they consider would be helpful for decision making.

Firms may refer to the list of recommended metrics in the CFRF disclosure guide. The CFRF’s disclosure working group is currently developing a climate Risk dashboard made up of a more focused list of key decision-useful metrics to be published later in 2021.

The FCA have stated that they will reference any further guidance in their policy statement accordingly.

Due to possible data availability, in-scope firms must address gaps using assumptions and proxies. However, firms must identify in the report where they have done so and briefly explain the methodologies used to address the gaps, in addition to any contextual information.

The approach to governance, strategy and risk management (which applies broadly across all products/portfolios, asset classes or investment strategies) is likely to overlap with the approach outlined in the TCFD entity report. Therefore, if there is a material difference in the approach for specific products/portfolios then these differences must be referenced in the product level disclosures.

Asset managers and asset owners should also conduct scenario analysis to test the resilience of their portfolios against a range of climate issues.


The disclosure rules would not apply to asset managers and asset owners with less than £5 billion in assets under management or administration on a 3-year rolling average (to be assessed annually) with respect to their business activities relating to the products and portfolios of the in-scope firms (listed below).

The products and portfolios that directly fall within the scope of the proposed rules for asset managers are:

  • authorised funds, excluding: feeder funds and sub-funds in the process of winding up or termination
  • unauthorised Alternative Investment Funds (AIFs)
  • portfolio management services.

The products that fall within scope of the proposals for asset owners are:

  • insurance-based DC pension schemes (eg, personal pensions and stakeholder pensions, including both workplace and non-workplace pensions (unit-linked and with-profits))
  • non-insurance DC pension schemes (eg, funds-based, offered by platform firms or similar)
  • SIPPs, either insurance or non-insurance-based, where the SIPP operator offers investments to be held within its SIPP wrapper.

The FCA’s entity-level disclosure proposals would capture in-scope UK firms’ asset management activities in respect of overseas funds and other overseas assets. Furthermore, overseas funds would also fall within scope in certain circumstances.

Timeline of proposal

First phase

Second phase

How Complyport can help?

If this article has raised any questions or you think your firm may require assistance meeting the new requirements, please contact Jonathan Greenstein now, via jonathan.greenstein@complyport.com, and book in a free consultation.

About Complyport

Complyport is a market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.

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Day to day, we conduct audits and reviews of a firm’s products, processes, policies and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Our clients tell us we live our values; we are driven, agile and collaborative.