General principles of disclosure

General principles

The TCFD recommendations identify several general principles for effective disclosures, including:

• Disclosures should represent information that is relevant and specific to the Firm;

• Disclosures should be clear, balanced, and understandable;

• Disclosures should be consistent (including in terms of format, language and metrics) over time to allow for inter-period comparison; and

• Disclosures should be reliable, verifiable, and objective. This means they should be free from bias and should be based on objective data and methodologies (incorporating common industry practice).

Consistency with TCFD recommendations

Firms are required to ensure their disclosures are consistent with the TCFD recommendations, except where the FCA has specified otherwise. In particular, Firms should ensure their reports reflect the following materials:

• TCFD annex

• Technical Supplement

• Risk Management Integration

• Metrics and targets

Data gaps

The FCA acknowledges that there may be data gaps or methodological challenges where Firms are seeking to calculate metrics or carry out quantitative analysis. Data gaps may arise where investee companies are not subject to mandatory climate-related disclosures or there is no issuer or investee company linked to the investment. These gaps should be addressed using proxy data (which might, for example, be data in respect of a similar issuer) or assumptions providing that the results are not, in the reasonable opinion of the Firm, misleading¹. Where the results are misleading the relevant metrics or analysis should not be published². The use of proxy data or assumptions should be fully disclosed and explained in the relevant disclosure. If a Firm has not been able to publish metrics or analysis because the use of proxy data or assumptions would make the disclosures misleading, then the Firm must disclose the relevant gaps or challenges, explain why the firm has been unable to address them and how it intends to address them in the future³.

Cross-references to other reports

A Firm is permitted to include cross-references to relevant climate-related financial disclosures contained in a third party’s climate reporting (these could, for example, be disclosures belonging to a non-UK entity) to enable the Firm to make its own TCFD reports. The Firm must set out the rationale for relying on these third-party disclosures, and any deviation between the third party’s approach and that of the Firm should also be explained⁴. Situations where this may be appropriate include a fund manager wishing to rely on disclosures made by a delegate, or feeder fund managers wishing to rely on disclosures made by the manager of the master fund.

1. ESG 2.1.11G
2. ESG 2.1.10R
3. ESG 2.1.12R
4. ESG 2.1.14R