FCA signals the expansion of climate disclosure rules

June 25, 2021

The UK’s Financial Conduct Authority (FCA) has published plans to extend climate-related disclosures to all companies listed on London’s main stock market as well as to all asset managers, life insurers and pension providers that it regulates.

Companies with a premium listing in the UK have been required to conform to the rules – based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) – since November last year.

The latest proposals will extend the TCFD requirement to all standard listed companies.

Asset managers, life-insurers, and FCA-regulated pension providers will also have to report in line with the TCFD and will be required to disclose as an organisation, with separate reporting for individual products and portfolios.

FCA is seeking feedback on the plans before 10 September, with a view to finalising regulation by the end of 2021.

The announcement is the first major policy proposal in the asset management sector since the end of the UK’s transition period of exiting the European Union. The EU introduced its own disclosure requirements under the Sustainable Finance Disclosure Regulation (SFDR). The FCA said its plans had been designed “with international consistency in mind”.

Sheldon Mills, executive director of consumer and competition at the FCA, said: “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 FCA proposals came as the US Securities and Exchange Commission (SEC) continued to debate how it can create and apply sustainability rules in its market.

In a speech this week to the National Investor Relations Institute, commissioner and acting SEC chairman Elad Roisman said he believed the commission needed to answer several questions before it could introduce ESG rules.

Trump-appointee Roisman said the SEC needed to work out what information investors were not already receiving; how the SEC could define the requirements for environment and social issues; and what outside expertise and infrastructure would be needed to apply the rules.