The Financial Conduct Authority (FCA), the conduct regulator for financial services firms announced today the publication of a set of final rules requiring investment managers, pension funds, life insurers and publicly listed companies to begin providing Taskforce on Climate-related Financial Disclosures (TCFD)-aligned climate disclosures, with implementation as soon as January 1, 2022 for large companies.
The release of the new policies follows the conclusion of a consultation launched by the FCA in June on its proposals aimed at ensuring that high quality 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.
In December 2020, the FCA announced disclosure rules for premium-listed companies, which are typically required to follow the most stringent compliance standards, requiring them to include a statement in their annual financial report stating whether the disclosures are consistent with TCFD recommendations and to explain if they are not consistent. The new policy now applies this ‘comply-or-explain’ approach to standard listed companies, and provides guidance for the companies in order to make their disclosures, for periods beginning on or after the beginning of 2022. The new policies also incorporate the TCFD’s guidance on providing disclosures relating to climate transition plans.
Under the policy related to asset managers and owners, such as investment managers, pension funds and life insurance companies, firms will be required to make annual disclosures at both an entity-level, setting out how they take climate-related matters into account in managing or administering investments on behalf of clients and consumers, and on a product level, including climate-related metrics regarding the firm’s products and portfolios. The new rules will apply to larger firms as of January 1, 2022, and for smaller firms the following year.
According to the FCFA, the new measures for part of the UK government’s green finance strategy, which envisions mandatory TCFD-aligned reporting economy-wide by 2025.
In a statement announcing the new policies, the FCA said:
“Better corporate disclosures will help inform market pricing and support business, risk and capital allocation decisions. And improved disclosures to clients and consumers will help them make more informed financial decisions. This, in turn, will strengthen competition in the interests of consumers, protecting them from buying unsuitable products and driving investment towards greener projects and activities.”