UK TCFD – Scope and implementation timings

Firms in scope

Asset managers are within scope of the requirement to prepare TCFD reports if they meet the assets under management (AUM) threshold (see below) and are one of the following:

A UK fund manager or self-managed fund. This includes funds and managers falling under both the AIFMD and UCITS frameworks; or
A UK authorised firm carrying out “portfolio management”. Portfolio management has an extended meaning and for these purposes the definition includes firms that provide traditional portfolio management services (i.e., take investment decisions on behalf of clients) as well as firms providing investment advice of an ongoing or recurring nature the “predominant purpose of which is investment in unlisted securities”. This latter aspect of the extended definition is intended to capture PE-style “adviser-arrangers” (although the investment strategy need not be private equity and could, for example, be private credit or real estate),

(collectively referred to in this Guide as “Firms”)¹.

The rules only apply to a Firm’s TCFD in-scope business and only when such business is carried out from an establishment maintained by it in the United Kingdom². TCFD in-scope business is fund management and portfolio management (which has an extended definition – see above). Where a fund manager has delegated the portfolio management of a fund to another entity activities will constitute TCFD in-scope business for both entities (subject to both being in the UK). Importantly, non-UK managers of funds marketed under the UK national private placement regime are not within scope.

Exemption for smaller firms

Firms are exempt from the requirement to prepare TCFD reports if and for so long as their assets under management (including assets under advice that fall within the extended meaning of portfolio management), calculated annually, amount to less than £5bn when taken as a 3-year rolling average³. A detailed calculation methodology for this £5bn threshold is not prescribed (for example, there are no rules concerning the timing of valuations, the methodologies that should be applied or the treatment of assets in respect of which discretionary management has been formally delegated to another entity). It seems open to Firms to apply any FCA recognised approach to calculating assets under management that reasonably captures all TCFD in-scope business undertaken by the Firm. Arguably it is only necessary to include in this calculation TCFD in-scope business carried on from an establishment in the UK.

Implementation timings

Firms must prepare their TCFD entity-level report and any public TCFD product reports by 30 June of each calendar year.

The first TCFD entity-level and any public TCFD product reports must be:

for Firms with assets under management and/or advice in excess of £50bn, published by 30 June 2023 (“Phase 1 Firms”); and
for Firms with between £5bn and £50bn assets under management and/or advice, published by 30 June 2024 (“Phase 2 Firms”).

For the purposes of the £50bn threshold, assets under management and/or advice should be calculated as a three-year rolling average and there is a prescribed methodology⁴.

1. ESG 1.2.1R(2)
2. ESG 1.2.1R(1)
3. ESG 1.2.2R
4. Methodology is the same method as that required for data element 1A (total funds under management) in data item FSA038 - Volumes and Type of Business. This is regardless of whether or not the Firm currently completes FSA038 and all funds under management should be included whether managed under a discretionary or an advisory arrangement.