Recent updates to the requirements for climate-related disclosures from the Task Force on Climate-related Financial Disclosures (TCFD) may require new attention from all companies, and in particular early attention for listed companies and large corporates.

Climate impact is a big concern for policymakers and early adopters may well get the proverbial worm in the coming months and years.

Read on to find out the basics of the new requirements and get in touch if you need more specific details.

What is TCFD?

In an initiative to standardise the climate-related risks and opportunities information provided to stakeholders (such as investors, lenders and insurers), the Task Force on Climate-related Financial Disclosures (TCFD) produced its recommendations ( for financial disclosures in June 2017.

Implementation of these recommendations includes building the capability to be able to identify, assess, manage and disclose climate-related risks and opportunities.

The recommendations themselves are tied to four keys areas that represent how organisations operate:

  1. Governance - governance around climate-related risks and opportunities.

  2. Strategy – actual and potential impacts of climate-related risks and opportunities on the business, strategy and financial planning.

  3. Risk management – the processes used to identify, assess and manage climate-related risks.

  4. Metrics and targets – the metrics and targets used to assess and manage relevant climate-related risks and opportunities.

Specific guidance for certain sectors including the financial sector and certain other non-financial sectors such as agriculture, food and forest products, energy, materials and buildings and transportation is also available. One point of particular note is that organisations are asked to prioritise risk management and governance structures.

At present the recommendations are not mandatory; they are followed on a “comply or explain” basis. However Chancellor Rishi Sunak has recently set out the government’s plan to ensure the UK remains a leader in green finance and confirmed that the UK will become the first country in the world to make TCFD aligned disclosures fully mandatory across the economy by 2025 in a gradual roadmap set out below.


Potential roadmap to mandatory TCFD disclosures

  • Premium listed companies
  • Occupational pension schemes (>£5 billion)
  • Banks, building societies and insurance companies
  • Wider scope of listed companies
  • UK registered companies (likely to be very large companies and listed or publicly quoted companies that are above thresholds for a medium company)
  • Occupational pension schemes (>£1 billion)
  • Large UK-authorised asset managers, life insurers and FCA-regulated pension providers
2023/24  Other UK-authorised asset managers, life insurers and FCA-regulated pension providers
2024/25   Other occupational pension schemes (subject to review)

The amount of ‘green data’ available has been gradually increasing, and the requirements for mandatory TCFD standards may ramp up data availability, accuracy of sustainability models and other climate impact tools.

New Listing Rule

The FCA has implemented a new Listing Rule (LR 9.8.6(8)) which applies to all premium listed commercial companies (applying to accounting periods beginning on or after 1 January 2021).

The new Rule is designed to help users of financial statements (including lenders) understand how a business is managing climate-related risks by requiring disclosures in annual reports consistent with the recommendations and recommended disclosures of the TCFDs.

This means that it is likely that first annual reports covering these requirements will be published in Spring 2022. The FCA is encouraging all premium listed companies to make all TCFD-aligned disclosures so far as they are able (even if they have not yet overcome any data modelling or analytical changes).

The new Rules require premium listed commercial companies (incorporated in the UK and overseas) to make “comply or explain” disclosures, in an organisation’s annual report, in relation to the recommendations and recommended disclosures of the TCFD on the disclosure of climate-related financial risks and opportunities. However, the FCA has indicated that it will issue an additional consultation paper in the first half of 2021 to consider strengthening the compliance basis for this rule even further.

While some companies may already voluntarily report in accordance with the TCFD recommendations, all premium listed companies will now need to consider the new Rule and the associated guidance to ensure that they have the arrangements and systems in place to be in a position to ensure that they can report accordingly.

The new Listing Rule should be welcomed and as climate reporting becomes more consistent and comparable this should lead to an acceleration in green investing and lending. However it remains to be seen whether other global reporting standards, such as the International Financial Reporting Standards (IFRS), will converge with these new standards.

Action points

Even organisations that have already been providing climate-based reporting may need to revisit their current reporting practises to consider if the current reporting is acceptable.

The new Listing Rules policy statement from the FCA notes that considerable improvement in TCFD is needed. As climate related disclosures bear more scrutiny, the content and consistency of such disclosures should be properly considered.

Each organisation will need to:

  • Check if current disclosures align with the TCFD recommended disclosures and identify any discrepancies.

  • Plan how to remedy the misalignment.

  • Decide the reporting strategy, including structure and content.

  • Prepare the draft statements and disclosures for reporting.

If you need additional support and advice on this area, please do get in touch.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2021. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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Date published

15 March 2021


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