FCA proposes changes to climate-related disclosures

The UK’s Financial Conduct Authority proposes the introduction of climate-related disclosure rules for the most prominent listed commercial companies in December 2020.

The regulator suggests to extend the application of its Taskforce on Climate-related Financial Disclosures (TCFD)-aligned Listing Rule to include premium-listed commercial companies to issuers of standard listed equity shares.

It also recommends an introduction of TCFD-aligned disclosure requirements for asset managers, life insurers, and FCA-regulated pension providers. A key focus of this will be on the information needs of clients and consumers.

These recommendations are part of the FCA’s first policy proposals for the UK asset management and asset owner sectors, since the end of the EU withdrawal period. It claims it approached the changes with international consistency in mind and to accommodate firms with different models.

It believes the changes will ensure the right information on climate-related risks and opportunities are available along the investment chain.

The regulator hopes this will encourage more investment into sustainable projects and activities.

FCA executive director of consumer and competition Sheldon Mills 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.”

In addition to these changes, the regulator is asking for opinions on other topical environmental, social and governance (ESG) issues in capital markets. This includes green and sustainable debt markets and the role of ESG data and rating providers.

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