TCFD: FCA publishes finalised proposals on climate-related disclosure rules

What has happened?

The FCA published in June 2021 new proposals on climate-related disclosure rules for listed companies and certain regulated firms. The proposals followed the introduction of climate-related disclosure rules for the most prominent listed commercial companies in December 2020, which are aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (the TCFD).

In December 2021, it published two Policy Statements, PS 21/23 and PS 21/24, confirming the final rules and guidance. The rules will come into effect from 1 January 2022. Asset managers and asset owners (life insurers and FCA-regulated pension providers) will have a phased implementation, with the rules initially applying to the largest firms and coming into effect for smaller firms one year later.

What do you need to do?

In the consultation, the FCA proposed:

• to extend the application of its TCFD-aligned Listing Rule for premium-listed commercial companies to issuers of standard listed equity shares and global depositary receipts, and
• to introduce TCFD-aligned disclosure requirements for asset managers (including UCITS and all AIF managers), life insurers, SIPP operators and FCA-regulated pension providers, with a focus on the information needs of clients and consumers.

The key elements of the confirmed proposals are:

• Entity-level disclosures.
  Firms will be required to publish, annually, a TCFD entity report published in a prominent place on the main website of the firm’s business setting out how they take climate-related matters into account in managing or administering investments on behalf of clients and consumers.

• Product or portfolio-level disclosures.
  Firms will be required to produce, annually, disclosures (including a core set of climate-related metrics) on the firm’s products and portfolios made publicly in a prominent place on the main website of the firm’s business and included or cross-referenced in an appropriate client communication, or made upon request to certain eligible institutional clients.

The proposals were among the FCA’s first substantive policy proposals for the UK asset management and asset owner sectors since the end of the EU withdrawal transition period. Given the global reach of regulated firms operating in the UK, the FCA approached the design of the regime with international consistency in mind and to accommodate firms’ different business models.

The rules are designed to help make sure that the right 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. This should help encourage investment in more sustainable projects and activities, consistent with the Chancellor’s expectations in the FCA’s remit letter that the FCA should ‘have regard’ to the Government’s commitment to achieving a net-zero economy by 2050.

How can we help you?

If you’d like to know more about how we can help you with your climate-related disclosure arrangements, or any other regulatory compliance issues, our expert team is here to help.

Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.