ESG 2.3 Product-level reporting

In addition to the publishing obligation in ESG 2.1.3R, a firm, other than a UK AIFM to which ESG 2.3.2R applies, must include its public TCFD product report, or an adequately contextualised and prominent cross-reference and hyperlink to the report’s location on the firm’s website, in any one of the following communications which follow most closely after the annual reporting deadline of 30 June, as applicable:

1. (1)

   the annual report or half-yearly report of an authorised fund as required under COLL 4.5.3R, COLL 8.3.5R or COLL 15.5.2R, provided that its public TCFD product report, or an adequately contextualised and prominent cross-reference and hyperlink to the report’s location on the firm’s website, is always included in the annual report;

2. (2)

   a periodic client report under COBS 16.3.1R, COBS 16.4.1R, COBS 16A.4.2AR or COBS 16A.5.1R;

3. (3)

   a report to with-profits policyholders under COBS 20.4.7R; or

4. (4)

   an annual pension benefit statement or an annual drawdown pension statement under COBS 16.6.8R.

A UK AIFM that manages an unauthorised AIF listed on a recognised investment exchange must include its public TCFD product report, or an adequately contextualised and prominent cross-reference and hyperlink to this report, in its TCFD entity report.

A firm is not required to prepare a public TCFD product report in respect of a product which is a wrapper, provided that it has issued public TCFD product reports for the TCFD products available within the relevant wrapper.

A firm is not required to prepare a TCFD product report in respect of an authorised fund, or where the authorised fund is an umbrella scheme the relevant sub-fund, which is in the process of winding up or termination.

1. (1)

   A firm must comply with ESG 2.1.1R(2) with respect to a request from a client who requires on-demand TCFD information in order to satisfy climate-related financial disclosure obligations, whether under this chapter or as a result of other legal or regulatory requirements.

2. (2)

   On receipt of a request from a client under (1), a firm must provide on-demand TCFD information as at a calculation date determined in accordance with ESG 2.1.9R or at an alternative calculation date where this has been agreed between the client and the firm.

3. (3)

   The request by a client in (1) may be made no earlier than 1 July 2023 in respect of any reporting period of the firm under ESG 2.1.2R(1) which starts after 1 January 2022 or, if later, with effect from the reporting period in which the client’s arrangements with the firm concerning the TCFD product commenced;

4. (4)

   This rule also applies in respect of a person who is an investor in an unauthorised AIF managed by a UK AIFM which is not listed on a recognised investment exchange.

The entitlement in ESG 2.3.5R(1) is limited to one request for an on-demand TCFD product report or underlying asset data or both in respect of each TCFD product in each of the firm’s reporting periods under ESG 2.1.2R(1).

If a person in ESG 2.3.5R requests additional climate or carbon-related data which are reasonably required in order to satisfy climate-related financial disclosure obligations, a firm must provide the data if doing so is reasonably practicable and permitted under any contractual arrangements governing the firm’s use of the data.

1. (1)

   A firm must include in its TCFD product report for each TCFD product information according to the following metrics, using the calculations contained in the TCFD Annex and having regard to the TCFD Guidance on Metrics, Targets, and Transition Plans, as relevant:

   1. (a)

      scope 1 and 2 greenhouse gas emissions;

   2. (b)

      scope 3 greenhouse gas emissions;

   3. (c)

      total carbon emissions;

   4. (d)

      total carbon footprint; and

   5. (e)

      weighted average carbon intensity.

2. (2)

   A firm’s TCFD product report must also include:

   1. (a)

      relevant contextual information such as explaining how the metrics should be interpreted and their associated limitations, for example, if particular assumptions or proxies have been used;

   2. (b)

      historical annual calculations of the metrics in (1), after the first year of preparing a TCFD product report; and

   3. (c)

      any disclosures under the Governance, Strategy and Risk Management recommendations under the TCFD Recommendations and Recommended Disclosures, where the firm’s approach in relation to a TCFD product materially deviates from the firm’s overarching approach disclosed in the firm’s TCFD entity report.

If a firm discloses material deviations under ESG 2.3.9R(2)(c), it may refer to the relevant sections of its TCFD entity report, and similarly its TCFD entity report may refer to these disclosures in the TCFD product report.

1. (1)

   Where a TCFD product report relates to a TCFD product that has concentrated exposures or high exposures to carbon intensive sectors, the firm must describe these and disclose:

   1. (a)

      a qualitative summary of how climate change is likely to impact the assets underlying the relevant TCFD product under ‘orderly transition’, ‘disorderly transition’ and ‘hothouse world’ scenarios;

   2. (b)

      a discussion of the most significant drivers of impact on that TCFD product; and

   3. (c)

      a quantitative analysis of ‘orderly transition’, ‘disorderly transition’ and ‘hothouse world’ scenarios.

2. (2)

   Where a firm manages TCFD products that do not have concentrated exposures or high exposures to carbon intensive sectors, a firm must still make the disclosures under (1)(a) and 1(b).

3. (3)

   For the purposes of (1)(a) and 1(c):

   1. (a)

      ‘orderly transition’ scenarios assume climate policies are introduced early and become gradually more stringent, reaching global net zero CO2 emissions around 2050 and likely limiting global warming to below 2 degrees Celsius on pre-industrial averages;

   2. (b)

      ‘disorderly transition’ scenarios assume climate policies are delayed or divergent, requiring sharper emissions reductions achieved at a higher cost and with increased physical risks in order to limit temperature rise to below 2 degrees Celsius on pre-industrial averages; and

   3. (c)

      ‘hothouse world’ scenarios assume only currently implemented policies are preserved, current commitments are not met and emissions continue to rise, with high physical risks and severe social and economic disruption and failure to limit temperature rise.

1. (1)

   Where a firm prepares a public TCFD product report in relation to a default arrangement or other fund in a qualifying scheme which uses life-styling or differing target retirement dates for different cohorts of members, a firm may calculate the information in ESG 2.3.9R to ESG 2.3.11R and, where relevant, ESG 2.3.13R, in relation to the most representative member profile in that default arrangement or fund.

2. (2)

   However, where relevant, the firm must include a qualitative explanation in its public TCFD product report of how this information might vary between cohorts.

When preparing a TCFD product report, a firm must, as far as reasonably practicable, also include the following calculations for each TCFD product:

1. (1)

   climate value-at-risk;

2. (2)

   metrics that show the climate warming scenario with which a TCFD product is aligned, such as using an implied temperature rise metric.