The Task Force on Climate-related Financial Disclosures (“TCFD”) was established by the Financial Stability Board to develop consistent climate-related financial disclosures for use by companies, banks and investors in providing information to stakeholders. The TCFD published a final report in June 2017 that contained 11 recommended disclosures under four overarching recommendations covering governance, strategy, risk management, and metrics and targets (the “TCFD Recommendations”). Almost four years later, the Financial Conduct Authority’s (“FCA”) Policy Statement (PS21/24) provided that, among others, certain asset managers would need to make climate-related disclosures consistent with the TCFD Recommendations on an annual basis at entity and product level. By introducing disclosures consistent with the TCFD Recommendations, the FCA aims to increase transparency on climate-related risks and opportunities and enable clients and consumers to make considered choices in matters relating to environmental, social and governance (“ESG”), and to further the Government’s commitment to mandatory TCFD-aligned disclosures across the UK economy by 2025 and a net zero economy by 2050. The rules and guidance for certain asset managers to make disclosures consistent with the TCFD Recommendations can be found in the FCA’s ESG Sourcebook (the “FCA ESG/TCFD Rules”).
The FCA ESG/TCFD Rules either apply, or will apply, to FCA-authorised asset managers (including, for the purpose of this Client Alert, FCA-authorised CLO managers) with assets under management (“AUM”) above certain prescribed thresholds. In addition, we understand that certain CLO investors are considering TCFD reporting as a pre-condition for investment in European CLOs (regardless of whether the FCA ESG/TCFD Rules are directly applicable to the relevant CLO manager), either to allow such CLO investors to comply with their own TCFD reporting obligations or because they regard TCFD reporting as an important ESG metric.
This Client Alert sets out a short synopsis of the reporting requirements and the scope of TCFD reporting as it applies to FCA-authorised CLO managers (which may also be relevant for out-of-scope CLO managers to the extent TCFD reporting is requested by CLO investors on their managed transactions).
Click here to read the full insight: 'TCFD Reporting and Implications for CLO Managers.'
