18 June 2020
Bank of England carry out climate risk assessment and FCA issue proposals for TCFD reporting
The Bank of England have carried out their first ever climate risk assessment and have revealed that part of its investment portfolio currently supports up to 3.5 degrees centigrade of global warming by the end of the century – well above the 2-degree goal of the Paris Agreement. Whilst emissions from its own activities have been cut, carbon-intensive activities continue to be invested in. Bank of England Governor Andrew Bailey conceded that the assessment “demonstrates the additional work needed to meet the UK’s goals of net-zero emissions by 2050. Interestingly, the study only looked at the Bank’s non-gilt corporate holdings which is a small part of the portfolio and it would be interesting to see how the rest of the portfolio compares. Read more in Business Green’s article here.
The disclosures are likely to be a reaction to ongoing climate reporting work by the Financial Conduct Authority “FCA” – one of the Bank’s regulatory arms of which Andrew Bailey is Chief Executive. Commercial companies with a premium listing may soon have to make climate related disclosures under new rules proposed by the FCA. The new rules were released in March 2020 for a consultation period and will require relevant companies to make disclosures consistent with the approach set out by the Task Force on Climate-related Financial Disclosures “TCFD”, or explain why they haven’t done so, in recognition of the fact that some companies may not yet be set up to report on climate change. The FCA will consider consulting on extending the rules to a wider scope of issuers and is also considering how to enhance climate-related disclosures for regulated firms including asset managers and life insurers, to ensure a coordinated approach here.
The Climate Financial Risk Forum – a group launched by the FCA and the Bank of England’s Prudential Regulation Authority in March 2019 – will soon be publishing industry guidance grounded in the TCFD’s recommendations that will complement the proposed new rule. However, publication of the guide is currently on hold as a result of the coronavirus pandemic – see here for further information.
At IMS we view these changes as another reminder that TCFD reporting is on its way and that companies should prepare to bring climate-related financial disclosures within their regular reporting cycle. For more information on TCFD, please see the suite of materials on our website.