Davy Horizons hosted virtual fireside chat on 28th October at 3pm which explored the expansion of climate related financial reporting disclosures (TCFD) plus the broader non-financial reporting requirements, global asset managers are setting for their portfolio holdings, read our key takeaways below;

• Institutionalise the thinking

“TCFD provides a framework to identify assess and report climate related financial disclosure. It presents an opportunity for firms to institutionalise the thinking, build the capacity and start to understand the direction of travel. I think there is one key message here … you are never going to figure it all out….. this is a journey, and once you think that you have figured it out, the field will evolve yet further, the science and data will get better.  You really need to build this institutional capacity for this be an ongoing or continuous effort, TCFD is not a rote, check the box reporting effort, it continuously evolves.’’ Curtis Ravenel, TCFD

• No need to jump into Climate scenario modelling for TCFD compliance.

In TCFD reporting, there is no need to dive straight into complex climate scenario modeling. It is an iterative process built off strong foundations. If the ability and capacity to do this type of climate modeling is already there, then it is welcomed. The investment community really wants to know that a company is aware and engaged on their key focal areas, building a true understanding of their climate related risks and opportunities before embarking on complex climate modelling.

• Own your narrative

It is crucial for businesses to ‘’own their own narrative’’, no matter where they are in their TCFD journey and they must commit to transparency. With the growth in Artificial Intelligence and Natural Language Processing, companies that don't currently disclose may have their climate risks and opportunities predicted for them by outside sources.  Being able to communicate to investors that a company is aware of these real issues and that they have engagement with senior leaders on what it means, is essential. We live in an increasingly hyper transparent world. The assurance requirements associated with that are also very real.

• SFDR Article 8 & 9 funds present a challenge for real economy companies

 “I know there's a number of companies who have real economy businesses and therefore have relatively high impact, businesses’ with products that we all continue to want and need and use. While the SFDR is still evolving, there is a concern that many real economy or hard to abate companies could get screened out completely from Article 8 and Article 9 funds. Right now, there is a danger that asset management industry could gravitate towards very low impact, clean, defensible funds and….turn its back…on the real industrial economy which actually needs the most support to transition their business models.  Hopefully these funds will also invest and support those companies through their transition phase and act as a force for good change. “ Andrew Cave Ballie Gifford.

Watch the virtual fireside chat