Climate reporting by asset managers, life insurers and FCA-regulated pension providers

This will interest:

• Asset managers.
• Life insurers.
• FCA-regulated pension providers.
• Trustees, operators and managers of occupational pension schemes.
• Industry associations, trade bodies and civil society groups.
• Accountants, auditors and investment consultants.
• Other regulators and policymakers.
• Consumer groups.

Overall, we found that our rules have increased firms’ consideration of climate risks and supported their integration into firms’ decision-making. Firms were more transparent with their clients and consumers but encountered some challenges with the availability of data and consistent, well-developed methodologies. They also considered some information too complex for retail investors to engage with and thought the regime could be less granular and more proportionate. They saw opportunities to simplify reporting, particularly given their broader sustainability disclosure obligations.

Specifically, we found: 

• Risk management: Firms noted that the rules have helped them to consider climate change as a material risk, build their capabilities and integrate climate risks and opportunities into their strategies. The rules have also helped firms to be more transparent with their clients and consumers about how they take into account climate risks when managing or administering assets on their behalf.
• Audience: Some firms told us that while detailed climate disclosure information is helpful for institutional investors, the disclosures may be too complex for retail investors. As such, firms said they receive limited response from retail investors on their TCFD reports, particularly at product level.
• Accessibility: While entity reports were broadly accessible from a firm’s main webpage, product reports were often difficult to find. This may have contributed to the lower levels of engagement at product level by retail investors.
• Data: Firms were generally able to report on backward-looking data, such as carbon emissions. But some firms found it more challenging to provide quantitative data to support forward-looking disclosures, such as scenario analysis. For example, only around half of the product reports we reviewed disclosed the impact of all 3 climate scenarios on the fund, as required. This limited comparability between reports.
• Proportionality: Firms, particularly asset managers, noted that they are required to report under multiple sustainability disclosure regimes and considered our TCFD rules too granular. They suggested that sustainability disclosures could be simplified and streamlined.
• Regulatory clarity: Firms were aware of the broader direction of travel towards the ISSB standards, globally and in the UK. So, they asked us to clarify the future of our TCFD rules. They encouraged us to consider international consistency while working with industry to develop a future regime which is practical for firms.