FCA Proposes New Climate Disclosure Requirements

    Stockholm (NordSIP) – The UK’s’s Financial Conduct Authority (FCA) has published proposals outlining new climate-related disclosure requirements for premium listed issuers. The new rule will require all commercial companies with a premium listing to either make climate-related disclosures consistent with the approach set out by the Taskforce on Climate-related Financial Disclosures (TCFD) or explain why not. The FCA will consider consulting on extending this rule to a broader scope of issuers.

    The proposals set out in the Consultation Paper build upon the recommendations of the TCFD, an existing global standard. The FCA is also seeking feedback on clarifications to how current requirements applicable to all listed companies already require climate- and other sustainability-related disclosure.

    The TCFD’s recommendations, published in 2017, constitute a framework for companies to disclose how climate-related risks and opportunities could impact their businesses. The recommendations are supported by a set of 11 recommended disclosures, in the areas of governance, strategy, risk management and metrics and targets.

    Recognising that climate disclosure standards and companies’’ understanding of the financial impact of climate change are still evolving, the FCA allows companies not yet able to make full disclosures, to explain this fact instead.

    “Climate change presents a serious and wide-ranging threat to global economic prospects, society more broadly and our natural environment,” Andrew Bailey, FCA Chief Executive, said. “The changes we propose will help to provide the transparency the market needs to be able to assess how well companies are adjusting to the risks of climate change. Improved disclosures will support better asset pricing and enable investors to make more informed choices about where to allocate their capital – which will ultimately support the transition to a low carbon economy.”

    The FCA also explains that the work of the Climate Financial Risk Forum will also help to build disclosure capabilities. The Forum is an industry group that the FCA launched jointly with the Bank of England’s Prudential Regulation Authority in March last year and will soon be publishing industry guidance, covering climate-related disclosures, risk management, scenario analysis and innovation. These guidance materials are also grounded in the TCFD’s recommendations and will complement the proposed new rule.

    The FCA is also currently considering how best to enhance climate-related disclosures by regulated firms, including asset managers and life insurers, to ensure a coordinated approach.

    The consultation period closes on 5 June 2020.

    For more information on this proposal from the FCA, please click here.

    Image © FCA

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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