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 wider 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 existing requirements applicable to all listed companies already require climate- and other sustainability-related disclosure.
The FCA recognises that standards for disclosure and companies understanding of the financial impacts of climate change are evolving. For this reason, where companies are not yet able to make full disclosures, they should provide an explanation of the reasons why.
Andrew Bailey, FCA Chief Executive, said:
‘Climate change presents a serious and wide-ranging threat to global economic prospects, society more broadly and our natural environment.
‘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 work of the Climate Financial Risk Forum – an industry group that the FCA launched jointly with the Bank of England’s Prudential Regulation Authority in March last year – will also help to build disclosure capabilities.
The Forum 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 FCA is working closely with Government and other regulators, including through a Taskforce established by the Treasury under the Government’s Green Finance strategy.
The consultation period closes on 5 June 2020.
Notes to editors
4. 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.
5. The Climate Financial Risk Forum is an industry group which was set up by the FCA and PRA in March 2019.
6. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
7. Find out more information about the FCA.