The FCA has published new proposals on climate-related disclosure rules for listed companies and certain regulated firms.
The proposals follow the introduction of climate-related disclosure rules for the most prominent listed commercial companies in December 2020 which are aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).
In the consultations the FCA is proposing:
- to extend the application of its TCFD-aligned Listing Rule for premium-listed commercial companies to issuers of standard listed equity shares
- to introduce TCFD-aligned disclosure requirements for asset managers, life insurers, and FCA-regulated pension providers, with a focus on the information needs of clients and consumers
Sheldon Mills, Executive Director of Consumer and Competition at the FCA said: 'The climate change challenge affects the whole of society. It is vital that the financial services sector plays a leading role in addressing this challenge. 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.
'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.'
The new proposals are among the FCA’s first substantive policy proposals for the UK asset management and asset owner sectors since the end of the EU Withdrawal transition period. 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.
The proposed rules are designed to help make sure that the right information on climate-related risks and opportunities is available along the investment chain – from companies in the real economy, to financial services firms, to clients and consumers.
This should help encourage investment in more sustainable projects and activities, consistent with the Chancellor’s expectations in the FCA’s recent remit letter that the FCA should ‘have regard’ to the Government’s commitment to achieve a net-zero economy by 2050.
Alongside these proposals, the FCA is also seeking views on other topical environmental, social and governance (ESG) issues in capital markets, including on green and sustainable debt markets and the increasingly prominent role of ESG data and rating providers.
The FCA is inviting feedback to both consultations by 10 September 2021 and intends to confirm its final policy on climate-related disclosures before the end of 2021. The FCA will separately consider stakeholder views on the ESG-related discussion topics in capital markets, with a view to publishing a Feedback Statement in the first half of 2022.
Notes to editors
- Consultation Paper: Proposals to enhance climate-related disclosures by asset managers, life insurers and FCA-regulated pension providers.
- Consultation Paper: Proposals to enhance climate-related disclosures by standard listed companies and seeking feedback on ESG topics in capital markets.
- December 2020 Policy Statement: Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations.
- The TCFD’s recommendations, published in 2017, constitute a framework for companies to disclose how climate-related risks and opportunities could impact their businesses. The recommendations are supported by a set of 11 recommended disclosures, in the areas of governance, strategy, risk management and metrics and targets.
- The Government aims to deliver a financial system which supports and enables a net-zero economy by mobilising private finance towards sustainable and resilient growth and is resilient to the physical and transition risks that climate change presents. The FCA should have regard to the government’s commitment to achieve a net-zero economy by 2050 under the Climate Change Act 2008 (Order 2019) when considering how to advance its objectives and discharge its functions.
- The Government published a Roadmap in November 2020 setting out a path towards mandatory TCFD-aligned disclosures across the economy by 2025. The proposed measures are consistent with the Government’s Roadmap.
- Climate change and sustainable finance web page.
- The FCA has an overarching strategic objective of ensuring that relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.