Bloomberg-led task force to develop climate disclosure recommendations for institutional investors

Financial Stability Board’s climate disclosure body issues first report

The high-level climate disclosure taskforce headed by former New York Mayor Michael Bloomberg will develop recommendations about how institutional investors and asset managers should report their exposure to climate change risks.

The Task Force on Climate-related Financial Disclosures (TFCD) was set up late last year by the Financial Stability Board (FSB) at the initiative of Bank of England Governor Mark Carney. Its initial remit was to develop voluntary climate financial disclosures for use by corporates to provide information to their lenders, insurers and investors.

But in its initial report, released today, the task force now says it will look at disclosures by institutional investors and asset managers.

It says: “The Task Force will seek to develop our recommendations for reporting by nonfinancial companies, financial intermediaries, and other capital market participants (including investors and asset managers) that may be exposed to material physical and nonphysical risks or potential risks and opportunities associated with climate change.”

The body’s recommendations for capital market participants are expected to focus on larger institutional investors, fund managers, and financial intermediaries (including lenders).

“Specifically, the Task Force will consider disclosures by equity/credit investors, institutional investors/asset managers, commercial and investment banks, insurance companies (including re- insurers), and institutional or fiduciary asset owners (e.g., pension funds), among others, to make sure that all relevant parts of the credit and investment chain are covered.“Since risks to the financial sector stem from risks associated with underlying loans to and investments in companies, effective financial-sector reporting will depend on and be derived from effective corporate reporting.”

“The Task Force will consider disclosures by institutional investors/asset managers and pension funds”

It goes on: “For disclosures by banks, investors, and other financial institutions, the Task Force will consider how portfolio-wide disclosures are used and how they can be aggregated for analysis.”

The Task Force will consider how its recommendations for voluntary disclosures can “best be integrated into” existing standards, practices, and procedures used in risk assessments, portfolio analyses, asset allocation, and/or engagement strategies. It recognizes that in some cases the same institution may be both a user and a preparer of climate-related financial disclosures.

The Phase 1 report adds: “Climate-related disclosures should also help users determine whether companies/investors have established and implemented an effective risk management process, including key risk indicators and key performance indicators, and are committed to continuous improvement.”

The task force will also look at disclosures related to other asset classes, such as debt, real estate, and infrastructure. Link