From 2023 asset managers are required by the Financial Conduct Authority (FCA)1 to produce climate reports for UK funds.
FCA draws on the Taskforce for Climate related Financial Disclosure (TCFD). This has led to a surge of fund-level climate data entering the markets.
However, the data can be confusing, hard to interpret and, at worst, misleading if presented in a way that does not clarify how the different climate metrics should (and should not) be interpreted. In this article we discuss the ways we interpret and understand climate metrics, helping our clients to understand the issues.
The availability and quality of climaterelated data is still evolving, and all companies are on a journey, both in assessing climate impacts on their business, and in determining how best to effectively communicate their plans to adapt and transition to a lower carbon economy – Thematic review of climate-related metrics and targets, UK Financial Reporting Council (2023).
At a glance
- The long-term performance of investment portfolios will be impacted by climate change and the energy transition, so it’s important that investors understand the risks and opportunities involved.
- The Taskforce for Climate related Financial Disclosure (TCFD) sets out a structure for disclosure, which is the basis for mandatory FCA reporting (starting in 2023) for UK investment funds.
- The aim of climate data is to provide consumers with a better understanding of how funds perform on climate metrics, making risks and opportunities more transparent, however, it can be confusing; we have some suggestions for how it can be meaningfully presented.
Interested in learning more?
Download the full document to learn how climate data can be better interpreted for investment portfolios.