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​FSB climate task force pushes for real-asset transparency

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Pension funds will be the subject to a climate disclosure framework being drawn up by a group convened by the Financial Stability Board (FSB).

The Task Force on Climate-Related Financial Disclosures (TCFD), chaired by US businessman Michael Bloomberg, also said it would look to enhance the disclosure framework for unlisted asset classes, including real estate and infrastructure.

Initially convened to design a consistent disclosure framework for listed companies to benefit institutional investors, the TCFD has now said it will also look at “effective” reporting by the financial sector.

Publishing its first report since being announced at the UN Climate Change Conference in Paris last year, the TCFD noted the “growing demand for decision-useful climate-related information” by financial market participants, which it said had led to a proliferation of different disclosure frameworks.

However, the report added that the information resulting from the numerous frameworks was often inconsistent and incomparable, acting as a “major” obstacle to considering climate-related risks as part of the investment process.

“Evidence suggests the lack of consistent information hinders investors from considering climate-related issues in their asset valuation and allocation processes,” it said, citing a paper published by consultancy Mercer last year.

Outlining areas on which its final report, due by December, would focus, the TCFD said it would examine the role of larger institutional investors, and included pension funds in its list, which also named insurers and asset managers.

It said the comprehensive list of stakeholders would ensure all parts of the credit and investment chain were covered.

The report also said it would look at opportunities to improve the climate-related disclosure for real estate and infrastructure but also debt and other non-equity asset classes.

Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change (IIGCC), welcomed the phase 1 report.

“In the light of the Paris Agreement, investors need better disclosure on how companies are adapting to this new policy framework, as well as the physical impacts of climate change,” she said.

“We strongly support the focus on more standardised disclosures and forward-looking quantitative and qualitative information.

“This will help investors better assess and address carbon risk in their portfolios.”

The focus on climate-related disclosures by infrastructure projects is also likely to be welcomed by the EDHEC Infrastructure Institute-Singapore, which is developing an investible benchmark for the asset class.

During the recent EDHECInfra conference in London, several participants cited the need for further research on climate-related disclosures and said EDHEC research chairs would examine the social and environmental outcomes of infrastructure projects.

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