Financial Conduct Authority  

FCA to require climate reports from providers and asset managers

FCA to require climate reports from providers and asset managers

The Financial Conduct Authority is to consult on forcing providers to disclose climate-related risks, in line with rules already proposed by the government.

 

The FCA will publish its consultation paper next month, featuring “proposals to require climate-related disclosures by asset managers, life insurers, and FCA-regulated pension providers, aligned with the recommendations of the [Task Force on Climate-related Financial Disclosure]”, according to its regulatory initiatives grid published on Friday.

Final rules are expected to be announced in the last quarter of 2021 and would bring the FCA's rules for regulated firms in line with those proposed by the Department for Work and Pensions.

The DWP in January launched a consultation on new rules in this area, which included broadening the scope of climate risk analysis to cover not just the environmental impact of pension schemes’ portfolios, but also sponsor covenants and actuarial valuations. 

The proposals stated that schemes with assets of £5bn or more will have to meet the new governance requirements from October 2021, and their trustees must publish a TCFD report within seven months of the end of the scheme year. 

The FCA’s consultation is part of a package of environmental, social and governance measures being pursued by the FCA, which is expected to publish consumer research findings on trust in the market for ESG and sustainable investments this month, with “next steps on guiding principles” following across the second and third quarters of this year.

“We are developing guiding principles for the design, delivery and disclosure of ESG/sustainable fund products to help ensure firms are clear about, and understand, their existing obligations, including their responsibility to provide information to consumers that is fair, clear and not misleading,” the FCA stated.

“This should support consumer access to genuinely sustainable investment products that meet their needs and preferences. We will also share the conclusions from a behavioural experiment looking at how ESG/sustainable claims affect consumer choices.”

The FCA’s June consultation into TCFD requirements will be accompanied by a second consultation looking at extending the scope of listed issuers covered by the regulator’s TCFD-aligned disclosure rules, with the final set being published in the last quarter.

Kate Smith, head of pensions at Aegon, said: “Although this is a little later than anticipated, it’s really helpful for the entire pensions industry to be aligned with the recommendations of the [TCFD].

“The DWP has already published its climate-related disclosure rules, and will require the largest single employer trust-based schemes, all master trusts and collective defined contribution schemes to publish their first TCFD report next year.

“To be able to do this, they are dependent on asset managers providing the required information in a timely and consistent manner.”

Benjamin Mercer is a reporter at FTAdviser's sister publication Pensions Expert