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Institutional investors welcome TCFD climate task force recommendations

High-level panel aims for a principles-based framework for voluntary disclosure

European institutional investors have welcomed the final recommendations of the high-level climate disclosure task force set in train by Bank of England Governor Mark Carney.

The panel – the Task Force on Climate-related Financial Disclosure (TCFD) under the auspices of the Financial Stability Board – released the report today and it was hailed by the Institutional Investors Group on Climate Change (IIGCC).

The TCFD aimed to devise a principles-based framework for voluntary disclosure, balancing the needs of the users of disclosures (investors) with the challenges faced by the preparers (companies). It has developed a voluntary framework for companies to disclose climate-related information in their financial filings.

Peter Damgaard Jensen, CEO of Danish pension fund manager PKA and Chair of IIGCC said: “Investors are pleased to see this industry-led forum publish a robust framework applicable across all sectors and jurisdictions.

Greater climate disclosure was “crucial” to secure “more complete, meaningful, reliable and consistent data” across all companies and sectors.

“Given their importance at the top of the investment supply chain, large asset owners and asset managers also recognise they have an important role to play in driving the swift and widespread adoption of this framework.”

Philippe Defosses, CEO of French pension fund ERAFP and Vice Chair of the IIGCC, added the TCFD would help investors to allocate the substantial amounts of capital required to implement the Paris Agreement and to work on their own climate risk disclosure: “There should be no resistance to the widespread adoption on the TCFD’s recommendations given how – in most G20 countries – companies already have legal obligations to disclose material risks in their routine financial filings.”Gerald Cartigny, Chief Investment Officer at Dutch asset manager MN called the TCFD framework a “good foundation”.

And IIGCC CEO Stephanie Pfeifer called on investors to use the TCFD in their engagements with companies, in their investment decisions and when deciding their voting at AGMs.

Carney said: “The Task Force’s recommendations have been developed by the market for the market.”

He continued: “Widespread adoption will provide investors, banks and insurers with that information, helping minimise the risk that market adjustments to climate change will be incomplete, late and potentially destabilising.”

As in its interim report, the Task Force is encouraging asset owners to help drive adoption of the recommendations. “Because asset owners and asset managers sit at the top of the investment chain, they have an important role to play in influencing the organizations in which they invest to provide better climate-related financial disclosures.”

The TCFD will continue until at least September 2018 to monitor implementation and the report will be presented at the July G20 Summit in Hamburg.

The report comes in the same week as new guidance on the European Commission’s directive on Non-Financial Reporting.

The key features of the TCFD recommendations:

  • Adoptable by all organizations
  • Included in financial filings
  • Designed to solicit decision-useful, forward- looking information on financial impacts
  • Strong focus on risks and opportunities related to transition to lower-carbon economy