TCFD-based reporting to become mandatory for PRI signatories in 2020

Supporting the adoption of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) is a high priority for the PRI as they provide a global framework for translating information about climate into financial metrics.

As part of our programme on championing climate action, in 2018, the PRI introduced TCFD-aligned indicators to its Reporting Framework. Despite the indicators being voluntary, over 480 investors representing US$42 trillion opted to complete the indicators and submit responses. In 2019 the climate indicators will again be voluntary.

However, from 2020, it is the PRI’s intention to make the climate indicators within SG 01 CC, SG 07 CC and SG 13 CC, mandatory to report but voluntary to disclose. The remaining PRI climate risk indicators will stay voluntary with a view to becoming mandatory as good practice develops.

Signatories will retain the option of being able to make their responses to this module either private or public. To support signatories in developing a response to the climate indicators, the PRI has consolidated guidance notes, investor case studies, webinars and a matrix of climate reference scenarios on a resource page.

Climate-related risks and opportunities are set to grow in the coming years. The impacts of 1.5°C of warming are now better understood with the IPCC reports stating that the world is on track to miss a manageable level of warming by a wide margin.

The PRI is concerned that the longer the world goes without a safe trajectory on climate change, the greater the risks for investors of an abrupt policy response,

Commenting on this announcement, Fiona Reynolds, CEO of the PRI said, “It is increasingly important for investors to incorporate emerging mega risks such as climate change into their view of the future. TCFD provides the best available framework for systematically including climate-related risks and opportunities into investment strategy.

”The PRI is pleased to further incorporate TCFD into our Reporting Framework and continues to be a strong supporter of the task force’s recommendations.”

Notes to editors

What is the TCFD?

• The Financial Stability Board (FSB)’s Taskforce for Climate-related Financial Disclosures (TCFD) published in June 2017 recommendations for voluntary climate-related financial disclosures that are consistent, comparable, reliable, clear, and efficient, and provide decision-useful information to lenders, insurers, and investors.
• The TCFD’s 32 members, including PRI Chair Martin Skancke, were chosen by the FSB to include both users and preparers of disclosures from across the G20’s constituency covering a broad range of economic sectors and financial markets.
• Since their publication, over 500 corporations and financial institutions, representing nearly $100 trillion, publicly support the recommendations. Financial regulators in over 10 market have endorsed the recommendations and / or have consultations on incorporating the recommendations into existing codes, standards and reporting requirements.

What were the TCFD recommendations?

• The Financial Standards Board (FSB) Taskforce on Climate-Related Financial Disclosure (TCFD) recommendations provide a common international framework for companies and investors to mainstream information about climate change into business and investment practice. The TCFD is notable for:

What did it recommend?: a voluntary series of recommendations clustered under four categories: governance, strategy, risk management and metrics.

Who are the recommendations for?: companies, banks, insurers and investors. The TCFD recommends investors are both the users and the preparers of the climate-relate disclosures.

Where should disclosures take place?: in company and investor mainstream financial filings (i.e. annual report or regular client reporting).

About the PRI

The Principles for Responsible Investment (PRI) is the world’s largest investor network on sustainable investing. Established in 2005 by the then UN Secretary General Kofi Annan, the PRI is now a privately funded organisation with over 2250 signatories (asset owners, investment managers, service providers), representing $83 tr of assets under management, to its six principles.

The PRI works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.

Improving ESG related disclosure is one of the PRI’s founding principles. As part of which, signatories are required to report to the PRI on annual basis.

Subset of PRI climate risk indicators to become mandatory in 2020