TCFD climate risk reporting for financial institutions


TCFD regulation will be mandatory in UK and companies will need to establish new systems and processes to improve accuracy of their reporting.

The new TCFD reporting rules covering financial institutions aim to enhance accountability on net-zero targets and climate transition plans.

Many large companies already report on TCFD as almost all FTSE 100 companies must report against the framework. Financial institutions that have yet to formalise TCFD reporting plans must now prepare for the UK’s planned phased adoption of the mandatory reporting rules. More mandatory reporting regulation is expected to follow.

Financial reporting is already covered by the UK Financial Conduct Authority and other securities regulators and now climate risk reporting is being demanded by major banks and wider regulators. The European Central Bank, Bank of England and US Federal Reserve Bank now consider climate-related risks to be a threat to global financial stability.

The Network for Greening the Financial System is calling for more accurate climate risk reporting and assessment to better align monetary policy with secure climate outcomes. Stakeholders in insurance, banking and asset management, in addition shareholders are now  demanding clear reporting on how financial institutions plan to identify risks, respond to challenges and implement strategic business plans that will benefit from an accelerated net-zero transition in line with the Paris Agreement.

With TCFD reporting becoming mandatory, companies will need to establish new systems and processes to improve consistency and accuracy of the information they produce. Changes will require new resources to satisfy reporting requirements but will also help to future-proof organisations. Long-term strategic decisions linked to climate risk and reporting will help companies to mitigate risk and identify new opportunities.

For UK-listed financial institutions TCFD becomes mandatory at different times:

2021-22: Premium listed companies required to ‘comply or explain’, including asset managers, life insurers and pension providers with assets under management over £5bn.

2022-2023: Large UK-authorised asset managers, FCA-regulated pension providers, pension schemes with AUM above £1bn.

2023-2024: All UK-authorised asset managers, life insurers and FCA-regulated pension providers.

2025 onwards: Ambition for full TCFD coverage, moving beyond ‘comply or explain’, accompanied by climate scenario analysis. Transition plans will likely be integrated into reporting.

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