PRI makes TCFD-style climate disclosures mandatory in 2020 reporting cycle

By Robin Hamaker-Taylor

In February 2019, the Principles for Responsible Investing (PRI) initiative, announced it will make several of its climate risk indicators mandatory for PRI signatories. PRI requires signatories to annually report various environmental, social, and governance (ESG) metrics via the PRI reporting tool. In 2018, the PRI introduced TCFD-aligned indicators to its Reporting Framework, including reporting on four indicators of climate risks: governance, strategy, risk management, and metrics and targets. Until now, this reporting has been voluntary and disclose.  

Which indicators will be mandatory?

Starting in 2020, the PRI’s strategy and governance (SG) indicators will be mandatory to report, though it will remain voluntary to disclose responses publicly. These indicators include:

• SG 01 CC: outline overall approach to climate-related risks;
• SG 07 CC: provide overview of those in the organisation that have oversight, accountability and/or management responsibilities for climate-related issues; and
• SG 13 CC: outline how strategic risks and opportunities are analysed.

PRI may require further climate risk reporting in the future

PRI currently has over 2,300 signatories, including asset owners, investment managers, and service providers that collectively manage over $83 trillion in assets. This change in their reporting framework will greatly increase the amount of climate-related reporting within its framework by signatories. This move also indicates the direction of travel regarding reporting on climate risks: the PRI has indicated that the remaining PRI climate risk indicators will stay voluntary with a view to becoming mandatory as good practice develops.

The climate change indicators of the overall Reporting Framework can be found here.

What is the PRI?

The PRI is a non-profit independent organisation that works to understand the investment implications of environmental, social and governance (ESG) factors. The PRI supports its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The organisation acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.

What are the Principles for Responsible Investment?

The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice:

Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.

Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.

Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.

Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.

Principle 5: We will work together to enhance our effectiveness in implementing the Principles.

Principle 6: We will each report on our activities and progress towards implementing the Principles.