This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.

Freshfields Sustainability

| 2 minutes read

Climate disclosure: FCA consults on mandatory TCFD listing rule

The FCA has launched its anticipated consultation on proposals to require companies with a UK premium listing to comply with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) in annual reports for reporting periods starting in 2021.

What is TCFD?

The TCFD was established in 2015 following a G20 call for measures to encourage companies to incorporate climate-related considerations in their financial disclosures in a consistent way which allows cross-market comparison. TCFD is not an emission reporting regime – it is a framework to inform investors, lenders and insurers as to how climate change could affect their investments.

The TCFD’s June 2017 report recommends disclosure in 4 areas:

  • Governance: How climate-related risks and opportunities are assessed by the company’s management and overseen by the board.
  • Strategy: How the company’s strategy and financial planning will or may be impacted by climate-related risks and opportunities, based on different climate scenarios.
  • Risk Management: The company’s processes to identify, assess, and manage climate-related risks. This includes both “physical” risks from climate change, and “transition” risks, to adapt the business to a low-carbon economy.
  • Metrics and Targets: The metrics and targets used to assess and manage relevant climate-related risks and opportunities.

The FCA’s proposal

Disclosure requirements

The FCA has proposed a draft Listing Rule which would require companies to address the TCFD recommendations in the narrative reporting section of mainstream financial filings, along with a statement of compliance.

Disclosure under the Governance and Risk Management recommendations would be required in all cases, and under the Strategy and Metrics and Targets recommendations where the information is material. Companies will be given an alternative option to “explain” where compliance is not achieved.

At this stage, there is no obligation for disclosures to be independently verified or assured, though auditors would have to satisfy themselves that the disclosures are internally consistent with the wider set of financial statements.

Who will need to comply (or explain)

The draft rule captures all commercial companies with a UK premium listing. At this stage, investment companies/trusts and other regulated firms such as insurers and assets managers are not caught (except in their capacity as premium issuers, if relevant). This would bring around 60% - or £2.3 trillion - of the market cap of the London Main Market under TCFD.


Given the “urgency and scale” of changes needed to tackle climate change, the FCA proposes quick action. The new rules are planned to take effect for accounting periods beginning on or after 1 January 2021, meaning TCFD disclosures would need to be made in 2022 annual reports.

The consultation is open until 1 October 2020, and responses can be submitted here.

What’s next?

The FCA’s announcement is not unexpected: it is consistent with the principles of UK Government’s Green Finance Strategy, and similar initiatives world-wide, and has been foreshadowed in announcements by a number of regulators. Authorities in other countries are very likely to pursue similar initiatives.

Meanwhile, voluntary disclosure under TCFD has already been increasing, particularly amongst the FTSE100. One of the global drivers has been investor pressure, particularly for carbon-intense assets under management.

The TCFD recommendations are gathering momentum, and they are broad and complex. The speed of the FCA’s proposal to mandate them means they demand immediate attention.


tcfd, climate change, annual report