Updated with clarification
Climate-related financial metrics being considered by the Task Force on Climate-related Financial Disclosures could be "onerous" for asset owners and lead to "carbon washing" of portfolios instead of standard measurements, the Transition Pathway Initiative said in a comment letter Thursday.
The TPI letter was responding in part to a larger TCFD consultation on new forward-looking climate metrics for the financial sector.
The portfolio alignment metrics being considered "will have a series of undesirable consequences for asset owners potentially forcing them to breach their fiduciary duties, imposing significant additional costs on asset owners," warned the letter from the TPI steering committee, chaired by Adam Matthews, director of the £2.8 billion ($3.6 billion) Church of England Pensions Board.
TPI is a global initiative to assess companies' preparedness for the transition to a low carbon economy; it is led by 105 institutional investors and supported by asset managers with a combined $29 trillion in assets.
"We remain concerned that the TCFD's proposals seem to have been developed without consideration of the feasibility and cost versus the benefits for pension funds or asset owners. We see the attraction of the TCFD's proposals for fund managers looking to develop and market green products, but do not see the same benefit for asset owners that have very different duties, interests and responsibilities," the letter said.
The most fundamental concern, the TPI steering committee said, was that the proposals will drive decisions that could undermine the transition to a low carbon economy, with one temperature benchmark being considered having the potential "to create wide misunderstanding and to drive the carbon washing of portfolios."
With the suggested metric, which TPI will address later in a technical response, "it would become increasingly difficult to hold a portfolio of transitioning assets in high carbon-intensive sectors, even if those very same companies had been responsive to investor engagement and made credible and independently verified net-zero aligned targets that were consistent with the transition," the TPI letter said.