UN PRI and the (mandatory) TCFD-aligned indicators – Raising the disclosure bar for climate stewardship

26 März 2021, Amery Gülker, Marc Göbbels

Ever since the Task Force on Climate related Financial Disclosures (TCFD) released its reporting framework in 2017, the UN-Principles of Responsible Investment (PRI) has been avidly supporting its adoption (for a brief recap of the TCFD framework, have a look at the box below). So it came as no surprise that for the 2018 reporting cycle PRI introduced TCFD-aligned indicators into its own reporting framework. Seen as an initial step, answering the indicators was voluntary, replies were not scored and signatories could decide whether they wanted to disclose their answers within public reports.

Following a two-year grace-period which left this approach unchanged – no scoring, disclosure of answers was voluntary - PRI began tightening its grip on signatories in 2020. Indicators on the Governance and Strategy elements of the TCFD framework became mandatory to answer, yet were still not scored and again only disclosed on a voluntary basis.

2021 – raising the disclosure bar

Now, with the 2021 reporting cycle, PRI is encouraging investors to take the next step in climate reporting: The Governance and Strategy-related indicators set to mandatory in 2020 will become so-called Core indicators within the revised UN PRI framework, meaning they are mandatory to answer for all signatories, and answers will be scored and made publicly available.

So what do these Core climate indicators assess?

In a slightly more overarching fashion, they question whether a signatory publicly supports the TCFD as well as the Paris Agreement. Then, following the TCFD’s Governance element, they assess whether and how a signatory’s board and management oversee and manage climate-related risks and opportunities.
Regarding the TCFD’s Strategy element, the indicators ask whether climate-related risks and opportunities have been identified, and if a signatory has been applying climate scenario analysis.

Responding to indicators pertaining to the two remaining TCFD elements Risk Management, and Metrics and Targets as well as the additional Strategy indicators will remain voluntary for now. However, PRI already announced that it is looking to change these to Core indicators within the upcoming reporting cycles. (The indicators can be found within the Investment and Stewardship Policy module of the PRI Reporting Framework, click here - starting on page 87)

That leaves the question:

How to approach the indicators, now that replies are scored and out in the open?

  • Investors who are more advanced within their climate considerations should have little trouble working on the Governance-related indicators, and also the Strategy section should only cause minor headache – though admittedly it will be interesting to see how signatories are making use of scenario analysis, given that according to the PRI only 20% of signatories incorporated this tool into their investment analysis in 2019/2020.

  • Investors at the beginning of their journey of climate stewardship face a slightly bigger challenge. To avoid having to negate the existence of climate-related Governance and Strategy setups while working on the PRI report, Investors could use the time left until the reporting window closes end of April to reach for the low-hanging fruits: Considering public commitments towards the Paris Agreement and the TCFD.


In a next step, a more thorough analysis of internal processes would be required: How can the management team as well as the board be included in climate-related risk and opportunity management? What kind of tools are needed to identify climate-related risks and opportunities within the investment process? And going a step further, how can climate-related risks and opportunities be managed? What sort of KPIs are useful in that regard and how can goals and targets be set accordingly?

There is no doubt that working on these issues will prove to be beneficial both from a reputational as well as PRI-scoring stand point. After all, according to the PRI only about one quarter of all 2020 signatories reported more advanced approaches to climate-related risk and opportunity management, meaning they performed some sort of climate scenario analysis and/or displayed approaches to Risk Management and tracking of Metrics and Targets.

It should be kept in mind, however: As the impacts of climate change are becoming more tangible by the day, climate-related risk and opportunity management is not merely a reporting exercise, but more and more part of fulfilling an investor’s fiduciary duty. A framework such as the one established by the TCFD provides a solid foundation that investors can use to set up their own climate-related risk and opportunity management -  and then apply it for stakeholder reporting. PRI’s push to more disclosure in line with the TCFD should therefore not be seen as an obstacle, but rather as what it was intended to be – a step towards increased climate stewardship.

The TCFD-Framework:

Launched in 2017, the framework provides companies with reporting recommendations in order to standardize climate-related disclosures and set them into a financial context.

While TCFD-aligned reports are intended to inform investors on the impacts of climate change, the framework is also a stylized “tool-kit” for a company’s internal risk management regarding climate-related financial risks. The framework is rapidly increasing in relevance on both the corporate as well as regulatory side, with currently more than 1,600 supporters, and New Zealand and the UK recently announcing their intention to make TCFD-aligned reporting mandatory for companies starting in 2023 and 2025, respectively. 

The framework is structured into four elements: Governance, Strategy, Risk Management, and Metrics and Targets. Within the Governance element, a company is encouraged to report how climate-related risks and opportunities are managed by the board and management. Strategy covers how climate-related risks and opportunities affect a company’s strategy. Risk Management looks at the actual measures applied to manage climate-related risks and Metrics and Targets calls for a description of metrics used to analyze and mange climate-related risks and opportunities, and asks for relevant climate-related targets to be disclosed.

Do you have any questions, need further information or support?

Please do not hesitate to contact us to discuss how our climate-related services can help you build your management and reporting capacities.