ESG 2 Disclosure of climate-related financial information

1. (1) A firm (excluding an OPS firm) must prepare and publish its TCFD entity report by 30 June of each calendar year.
2. (2) [deleted]

1. (1)

    A firm must cover a reporting period of 12 months starting no earlier than 1 January of the previous calendar year in its TCFD entity report.

2. (2)

    The reporting period in (1) may be changed by the firm in subsequent yearly reports, but the firm must ensure there is no period of time after 1 January 2022 which is not covered by its TCFD entity report, issuing an interim report if necessary.

3. (3)

    A firm must adopt a calculation date within the 12-month reporting period covered by the TCFD entity report in calculating any metrics and targets for inclusion in that report.

A firm must take all reasonable steps to publish its TCFD entity report in a way that makes it easy for prospective readers to locate and access, including, as a minimum, by making the most recent of these reports available in a prominent place on the main website for the business of the firm.

A firm must ensure the climate-related financial disclosures in its TCFD entity report are consistent with the TCFD Recommendations and Recommended Disclosures, unless otherwise specified by rules in this chapter.

In complying with ESG 2.1.5R, a firm must take reasonable steps to ensure its climate-related financial disclosures also reflect the following materials, to the extent they are relevant to the firm’s TCFD entity report:

1. (1)

    section C of the TCFD Annex, entitled “Guidance for All Sectors”; and, as applicable,

2. (2)

    part 3, section D of the TCFD Annex, entitled “Asset Owners”; or

3. (3)

    part 4, section D of the TCFD Annex, entitled “Asset Managers”.

In satisfying its reporting and disclosure obligations under this chapter, a firm must, insofar as is reasonably practicable, use the most up to date information available.

A firm must not disclose metrics or quantitative examples to demonstrate its approach to climate-related scenario analysis where:

1. (1)

    there are gaps in underlying data or methodological challenges; and

2. (2)

    these data gaps or methodological challenges cannot be addressed using proxy data or assumptions without the resulting disclosure, in the reasonable opinion of the firm, being misleading.

In addition, a firm must ensure its TCFD entity report includes an adequate explanation of:

1. (1)

    any gaps in the underlying data relied upon to make climate-related financial disclosures consistent with the TCFD Recommendations and Recommended Disclosures;

2. (2)

    how the firm has addressed these gaps, for example, by using proxy data or assumptions and briefly setting out any methodologies used in doing so, providing relevant contextual information and explaining any limitations of the approach;

3. (3)

    any metrics or quantitative scenario analysis or examples that the firm has not been able to disclose, in accordance with ESG 2.1.10R; and

4. (4)

    in respect of (3),

   1. (a)

       the gaps in underlying data or methodological challenges that have resulted in the firm being unable to make the relevant disclosure;

   2. (b)

       why the firm has not been able to address those gaps or challenges using proxy data or assumptions; and

   3. (c)

       what steps the firm will take to address those gaps or challenges in the future.

1. (1)

    A firm may include hyperlinks and cross-references to relevant climate-related financial disclosures contained in a third party’s climate reporting, where such information enables the firm to make climate-related financial disclosures consistent with the TCFD Recommendations and Recommended Disclosures.

2. (2)

    The firm must set out the rationale for relying on these third party disclosures, and any deviations between the third party’s approach and that of the firm, where relevant to the TCFD Recommendations and Recommended Disclosures.

3. (3) [deleted]

1. (1)

    Subject to ESG 2.2.5R and ESG 2.2.6R, a firm must include in its TCFD entity report climate-related financial disclosures regarding the overall assets managed or administered by the firm in relation to its TCFD in-scope business as defined under ESG 1A.1.1R.

2. (2)

    A firm must explain in its TCFD entity report where its approach to a particular investment strategy, asset class or product is materially different to its overall entity level approach to governance, strategy or risk management under the TCFD Recommendations and Recommended Disclosures.

3. (3)

    A firm must briefly explain in its TCFD entity report how the firm’s strategy under the TCFD Recommendations and Recommended Disclosures has influenced the decision-making and process by which it delegates functions, selects delegates, and relies on services, strategies or products offered or employed by third parties, including delegates.

1. (1)

   When preparing information for a TCFD entity report in a manner consistent with recommended disclosure (c) under the strategy recommendation in the TCFD Recommendations and Recommended Disclosures, a firm must explain:

   1. (a)

      its approach to climate-related scenario analysis; and

   2. (b)

      how the firm applies climate-related scenario analysis in its investment and risk decision making process.

2. (2)

   Where reasonably practicable, a firm must provide quantitative examples to demonstrate its approach to climate-related scenario analysis.

1. (1)

   In producing its TCFD entity report and considering recommended disclosure (c) under the metrics and targets recommendation in the TCFD Recommendations and Recommended Disclosures, a firm must describe any targets it has set to manage climate-related risks and opportunities, including the KPIs it uses to measure progress against these targets, in a manner consistent with the TCFD Recommendations and Recommended Disclosures.

2. (2)

   Where a firm has not yet set such targets, it must explain why in its TCFD entity report.

1. (1)

   If a firm is a member of a group, it may rely on climate-related financial disclosures consistent with the TCFD Recommendations and Recommended Disclosures made by its group or a member of its group when producing its TCFD entity report, but only to the extent that those group disclosures are relevant to the firm and cover the assets the firm administers or manages as part of its TCFD in-scope business.

2. (2)

   If a firm does rely on such group disclosures, it must ensure that its TCFD entity report:

   1. (a)

      includes cross-references, including hyperlinks, to any climate-related financial disclosure contained within the group or group member’s report that relate to assets managed or administered by the firm in relation to its TCFD in-scope business on which the firm is relying to meet its disclosure obligations under this section; and

   2. (b)

      sets out the rationale for relying on the disclosure made by its group or a member of its group and why the disclosure is relevant to the assets managed or administered by the firm in relation to its TCFD in-scope business.

3. (3)

   The firm must also ensure that any material deviations between its approach under the TCFD Recommendations and Recommended Disclosures and the climate-related financial disclosures contained within the group report are clearly explained, either in its TCFD entity report or in the report made by its group or a member of its group.

1. (1)

   If a firm or a member of its group produces a document, other than its annual financial report, which includes climate-related financial disclosures consistent with the TCFD Recommendations and Recommended Disclosures in compliance with UKLR 6.6.6R(8) for its TCFD in-scope business, the firm may cross-refer to these disclosures in its TCFD entity report where this information is relevant to clients or a person who is an investor in an unauthorised AIF managed by a UK AIFM, including hyperlinks to where the relevant disclosures are available.

2. (2)

   Where a firm so refers, it must explain in its TCFD entity report the rationale for relying on the disclosures in the supplementary document and how such disclosures are relevant to the clients or a person who is an investor in an unauthorised AIF managed by a UK AIFM of the firm’s TCFD in-scope business.

A firm’s TCFD entity report must include a statement, signed by a member of senior management of the firm, confirming that the disclosures in the report, including any third party or group disclosures cross-referenced in it, comply with the requirements under this chapter.

1. (1) in relation to managing an authorised fund that is not a feeder fund. This includes, where the authorised fund is an umbrella scheme, each sub-fund within that umbrella;
2. (2) as an insurer or pure reinsurer, in relation to providing or operating an insurance-based investment product, personal pension scheme, stakeholder pension scheme or SIPP with respect to:
   1. (a) a with-profits fund;
   2. (b) a linked fund; or
   3. (c) a pre-set investment portfolio;
3. (3) otherwise than as an insurer or pure reinsurer, in relation to operating a personal pension scheme, stakeholder pension scheme or SIPP with respect to:
   1. (a) an authorised fund;
   2. (b) a closed-ended investment fund; or
   3. (c) a pre-set investment portfolio; or
4. (4) in relation to managing an unauthorised AIF which is listed on a recognised investment exchange (including an investment trust) unless it is:
   1. (a) a closed-ended AIF that makes no additional investments after 22 July 2013 (see regulation 74(1) of the AIFMD UK Regulation);
   2. (b) a SEF; or
   3. (c) an RVECA.

1. (1) A firm must periodically consider whether climate-related risks could be materially relevant to the financial performance or return of a product which the firm manages, operates or provides under ESG 2.3.1AR.
2. (2) Where a firm produces communications for retail clients which provide general information on the risk and financial returns of a product, it must include in those communications any climate-related risks it has identified under (1).

1. (1) A firm should undertake its obligations under ESG 2.3.1BR(1) in a manner and with a frequency which is appropriate for that product and may choose to do so as part of the firm’s usual risk assessment procedures.
2. (2) For the purposes of ESG 2.3.1BR(2), a firm may, where applicable, choose to disclose climate-related risks as part of the risk and return information contained in a product summary. 

1. (1) the products the firm manages, operates or provides under ESG 2.3.1AR;
2. (2) the investments, including rights to or interests in investments, in respect of which the firm provides portfolio management to a client; or
3. (3) the assets under management in an unauthorised AIF, in which the client or person is an investor, managed by a full-scope UK AIFM or a small authorised UK AIFM which is not listed on a recognised investment exchange.

1. (1) Where a client or a person requires climate-related information in order to satisfy their legal or regulatory climate-related financial disclosure obligations, a firm must, on request, provide to that client or person, at a minimum, data on scope 1, 2 and 3 greenhouse gas emissions as required to meet that client’s or person’s climate-related financial disclosure obligations.
2. (2) The obligation in (1) applies to a firm in relation to 1 request for information from a client or a person per calendar year in relation to each of the products the firm operates, manages or provides under ESG 2.3.4AR.

1. (1) climate or carbon-related data which is reasonably required in order to satisfy the client’s or person’s climate-related financial disclosure obligations; and/or
2. (2) an explanation of the proportion of each product for which data is verified, reported, estimated or unavailable.

1. (1) provide the information to a client or person within a reasonable period of time;
2. (2) provide the information to a client or a person in a format in which the firm, acting reasonably, considers appropriate;
3. (3) provide contextual information where relevant, such as an explanation as to how certain data and information should be interpreted and any associated limitations; and 
4. (4) refrain from providing information which, in the reasonable opinion of the firm, is misleading due to data gaps or methodological challenges which cannot be addressed using proxy data or assumptions.