June 2, 2021

Following the Footpath to Mandatory TCFD Disclosure in the United Kingdom: Lessons for Canadian and Other Regulators


Regulators in Canada and elsewhere are considering regulatory changes to accelerate the transition towards net-zero carbon emissions. Part of that consideration is whether to adopt the Taskforce on Climate-related Financial Disclosures (TCFD) four pillar framework of governance, strategy, risk management, and metrics and targets. We can learn from regulators that have already adopted measures, in particular, the recent activities of the United Kingdom (UK) Government. The UK Government is committed to mandatory climate-related TCFD-aligned disclosures across the UK economy over a five-year period, including: listed commercial companies, UK-registered companies, banks and building societies, insurance companies, asset managers, and Financial Conduct Authority (FCA)-regulated pension schemes.

Financial institutions supervised by the UK Prudential Regulation Authority (PRA) are now required to disclose climate-related risks in line with TCFD, including insurance and reinsurance firms, banks, building societies, and PRA-designated investment firms, and the deadline for fully-embedded TCFD disclosure is 31 December 2021. The move to mandatory disclosure is part of the UK’s broader strategy to decarbonize the UK economy.

The FCA has published a final rule for UK premium listed companies, which requires them to disclose compliance with the TCFD recommendations on a comply-or-explain basis effective January 2021. Companies need to assess if their approach to managing climate-related risks is consistent with the TCFD and, if not, develop a programme for achieving compliance, including establishing board-level governance and risk management structures and processes for effectively managing and disclosing climate-related risks to TCFD standards. In 2022, mandatory disclosure will extend to UK-registered companies, a wider scope of listed companies, the largest UK-authorised asset managers, and FCA-regulated pension providers with greater than £1 billion in assets under management. Pursuant to existing prospectus and continuous disclosure requirements, listed companies must already disclose material climate matters needed for investors to make informed decisions.

The UK Government also proposes using the TCFD as the basis of its disclosure requirements under UK company law and limited liability partnerships law. It anticipates that 50% of UK-registered large private companies will be subject to mandatory disclosure requirements in 2022. The goal is to move from comply-or-explain to ‘comply’. The FCA has stated that it expects companies to be able to make TCFD-aligned disclosures except where they face transitional challenges in obtaining the relevant data or embedding relevant modelling or analytical capabilities.

The Climate Financial Risk Forum, in which senior financial industry representatives and regulators cooperate to advance responses to climate-related financial risks and opportunities, has been pivotal in building private-sector support for the TCFD framework. This briefing note, current to May 2021, highlights the policy rationales for moving to mandatory TCFD-aligned disclosure, sets out the paths the UK Government is taking to make disclosure mandatory across the economy, and raises important considerations for regulators in Canada and elsewhere.

This is a Canada Climate Law Initiative publication.

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