The Task Force on Climate-related Financial Disclosures (TCFD) framework has moved from voluntary best practice to mandatory disclosure requirement for large UK companies and FCA-regulated firms above specified thresholds. Understanding what TCFD requires — and how the FCA’s mandatory TCFD rules are structured — is essential for any senior manager, CFO or compliance officer at a firm within scope.

What Is TCFD?

The Task Force on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board in 2015 and published its recommendations in 2017. The recommendations provide a voluntary framework for companies to disclose climate-related financial information across four pillars: governance, strategy, risk management, and metrics and targets. Since 2021 the TCFD framework has moved from voluntary best practice to mandatory requirement for large UK companies, premium-listed companies, and FCA-regulated asset managers and asset owners above specified thresholds.

The Four-Pillar Framework

TCFD structures climate disclosure around four interconnected pillars. Governance: how the board oversees climate-related risks and opportunities, and how management assesses and manages them. Strategy: the actual and potential impacts of climate-related risks and opportunities on the business, strategy and financial planning — including scenario analysis showing resilience to different climate pathways. Risk management: the processes used to identify, assess and manage climate-related risks and how these integrate with overall risk management. Metrics and targets: the metrics used to assess climate-related risks and opportunities, including Scope 1, 2 and 3 greenhouse gas emissions and progress against targets.

Mandatory TCFD in the UK

The FCA’s mandatory TCFD rules (PS21/24) require asset managers, asset owners and life insurers above thresholds to make TCFD-aligned disclosures at both entity level and product/portfolio level. The entity-level report — the Firm-level TCFD report — covers governance, strategy, risk management and metrics across the firm. The product/portfolio level report covers how climate-related risks and opportunities are managed in each in-scope investment product or portfolio. Large firms (above £50bn AUM) were required to comply from January 2023; smaller firms (£5bn–£50bn AUM) from January 2024.

Scenario Analysis

Scenario analysis is one of the most demanding elements of TCFD. The strategic pillar requires firms to assess the resilience of their strategy under different climate scenarios — typically including a 1.5°C or 2°C Paris-aligned scenario and a higher-warming delayed-action scenario. The analysis must be credible and forward-looking, covering both transition risks (the financial impact of moving to a lower-carbon economy) and physical risks (the direct impact of climate change on assets and revenues). For investment managers, this means assessing the climate risk profile of portfolios, not merely the firm’s own operational emissions.

TCFD and the UK SDR

The FCA’s UK SDR builds directly on TCFD. The entity-level disclosures required under UK SDR align closely with the TCFD framework, and firms that have already implemented TCFD reporting have a strong foundation for meeting their UK SDR entity-level obligations. The TCFD framework also informs the product-level disclosures required for SDR-labelled funds, particularly for funds with climate-focused investment strategies.

The Finance and Compliance Function’s Role

TCFD implementation requires close collaboration between the CFO, the compliance function and the investment teams. The CFO owns the financial modelling and scenario analysis; the compliance function owns the disclosure framework and the regulatory alignment; the investment teams provide the portfolio-level data. Firms without a dedicated ESG or sustainability function have found TCFD implementation particularly demanding, which is why the combination of TCFD expertise with either finance or compliance skills is increasingly a specific hiring requirement.

Adrian Lawrence FCA — Founder, FD Capital Recruitment Ltd

ICAEW Registered Practice | Companies House No. 13329383

“TCFD reporting has moved from a voluntary initiative to a mandatory obligation for firms within scope, and the FCA’s expectations are rising with each reporting cycle. CFOs and compliance officers at asset managers, insurers and large investment firms need to understand both the quantitative modelling requirements and the governance obligations. We place finance directors and compliance officers with TCFD implementation experience across regulated financial services.”

Need a CFO or Compliance Officer for TCFD?

FD Capital places finance directors and compliance officers with TCFD implementation experience across FCA-regulated firms — on interim, fractional and permanent mandates.

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