FCA proposes climate-related disclosures

The FCA has published a consultation paper on proposals for climate-related disclosures for the UK.

Why?

In November 2020, the Government published a roadmap towards mandatory climate-related disclosures across the UK economy by 2025, aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).

The FCA’s proposals aim to play a part in delivering this roadmap.

The proposals, which are believed to be some of the first substantive policy proposals for the UK asset management and asset owner sectors since Brexit, aim to increase transparency, while enabling clients to make considered choices while remaining proportionate for firms.

“Managing the risks of climate change and transitioning to a cleaner and less carbon-intensive economy will require high quality information on how climate-related risks and opportunities are being managed throughout the investment chain,” said Sheldon Mills, executive director of consumer and competition at the FCA. “However, climate-related disclosures do not yet meet investors’ and market participants’ needs. The new rules will help markets, investors and ultimately consumers better understand the impact of climate change and make more informed decisions.”

What are the proposals?

The FCA’s proposals include the following:

Entity level disclosures
Firms would be required to publish an entity-level TCFD report annually on how they take climate-related risks and opportunities into account in managing or administering investments on behalf of clients and consumers.

Product or portfolio-level disclosures
Firms would be required to produce a baseline set of consistent, comparable disclosures annually, in respect of their products and portfolios, including a core set of metrics.

Who do the proposals apply to?

These latest proposals directly affect asset managers, as well as be of interest to the following stakeholders:

• Industry associations, trade bodies, industry experts and academics
• Accountants, auditors and investment consultants
• Other regulators and policy makers

According to the regulator, “Given the global reach of regulated firms operating in the UK, the FCA has approached the design of the regime with international consistency in mind and to accommodate firms’ different business models.”

Next steps

To read the full consultation paper, click here.

Responses to the consultation must be sent to the FCA by 10 September 2021.

To give feedback on the proposals, click here for the FCA’s online response form or email cp21-17@fca.org.uk

The FCA has stated that subject to feedback, the regulator aims to publish a policy statement later this year.