TCFD to launch portfolio alignment metrics consultation 'later this month'

The Taskforce for Climate-related Financial Disclosures (TCFD) will be launching a consultation on the best practice for portfolio alignment metrics later this month, UN Special Envoy for Climate Action and Finance, Mark Carney, has confirmed.

Speaking at the Make My Money Matter inaugural Net Zero Pension Summit, Carney emphasised that pension funds have a "critical role" to play in ensuring a successful transition to net zero, backing the calls for action from other global experts.

He stated: “Addressing climate change is obviously in the worlds interest, but increasingly pension funds recognise that it’s also in their interest, because climate risk is investment risk.

“The scale of stranded assets is only starting to be appreciated, and not thinking about terminal value in a world on the road to net zero could well prove terminal for some portfolios."

Indeed, Carney stressed that as long-term investors, pension funds are amongst the “most vulnerable” to the financial risk posed by climate change, clarifying however, that the long-term horizon also provides an opportunity to be “at the frontier” of investing in climate-resilient infrastructure.

“Addressing climate change is an enormous opportunity," he stated. "Achieving net zero requires a whole economy transition, that means every company, bank, insurer and investor will have to adjust their business models, and in the process turn an existential risk into what I’d argue is the greatest commercial opportunity of our time."

He continued: “As a sector, you’re hugely influential in aligning other parts of the system, such as asset managers proxy advisers and companies themselves towards net-zero objectives.

"The UK is leading the way by making TCFD disclosures mandatory by 2025 for all companies, and other countries are now following suit and in parallel, and this is critical. International standard setters are taking action, particularly the IFRS, whose reporting standards will reach into a 140 countries."

However, Carney clarified that what is "critical" is moving beyond commitments to actually align portfolios with the net-zero transition, as well as communicating this with the members that pension schemes serve.

In light of this, he confirmed that the TCFD will be consulting later this month on the best practice for portfolio alignment metrics, and will also be issuing further guidance on this “critical tool” just before COP 26.

He added: “Investors, including pension funds, need to provide answers, transparent readily understandable answers, for when their clients, people, ask whether their money is being invested in line with their values, and in line with the transition to net zero.

“The challenge to the industry is to make a material and meaningful metric so that people can make their money matter."

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