Listed issuers must now disclose climate-related risks and opportunities, in alignment with the recommendations of the Taskforce of Climate-related Financial Disclosure (TCFD), within their annual reports with effect from 1 January 2022 – or explain why it is missing.
The Financial Conduct Authority (FCA) published two policy statements towards the end of December 2021 confirming final rules and guidance to promote better climate-related financial disclosures for issuers of standard listed shares, or equity shares represented by certificates from the start of January 2022. Asset managers with over £50bn in assets under management (AUM) are now also required to make this information available to clients.
Better corporate disclosures, the UK regulator said, will “help inform market pricing and support business, risk and capital allocation decisions”, and also help clients and customers make “more informed financial decisions”.
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Asset managers and asset owners
In the final policy statement FCA’s new rules on climate-related disclosures to help investors, clients and consumer released in December, the regulator said it had considered feedback from 87 investment firm respondents where there was “broad support for most of [the] proposals” even though a small number felt they did not go far enough.
The feedback raised the challenges data gaps and sometimes poor quality of qualitative information but also acknowledged “the need to get started”.
As a result, the FCA amended these requirements saying where asset managers agreed they could not calculate meaningful and “decision-useful” climate related metrics, or could end up in providing misleading disclosures, firms would need to explain where and why not. The FCA added it expects these data challenges to be resolved over the medium to long term.
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Feedback also questioned the length of the transition plans for asset managers – there is an 18-month implementation timeframe to publish disclosures. The FCA felt this was sufficient and did not further delay the introduction, but will be monitoring the situation.
Questions were also raised round the size of firms required to adhere to new guidance. The FCA clarified asset managers with over £50bn in AUM should be adhering to the disclosures guidance effective 1 January 2022, and those below that threshold a year later, but in the meantime it urged them to make disclosures voluntarily where possible or start building capabilities to do so.
The FCA did, however, amend guidance on providing ‘on demand’ climate-related information to multiple clients at different reference dates and formats.
“We have amended the ‘on demand’ rule to enable clients to request a product-level climate disclosure at a single reference point consistent with public disclosures, or at a date mutually agreed between the client and the firm. Firms must also provide the data in a ‘reasonable’ format, considering the needs of the client. We consider that the industry would be best placed to develop a standardised template, if deemed useful,” the policy paper said.
The FCA also confirmed it is continuing to explore product-level disclosure as part of the Sustainability Disclosure Requirements (SDR) regime.
The measures are part of the UK government’s coordinated work to introduce TCFD-aligned disclosures across the economy by 2025, as part of the UK’s wider net zero commitment.
