On 22 June 2021, the FCA published the following:
- Consultation Paper 21/17: Enhancing climate-related disclosures by asset managers, life insurers, and FCA-regulated pension providers (CP21/17).
- Consultation Paper 21/18: Enhancing climate-related disclosures by standard listed companies and seeking views on ESG topics in capital markets (CP21/18).
Background
In November 2020, the Government published a Roadmap towards mandatory climate-related disclosures across the UK economy by 2025, aligned with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).
CP21/17
In CP21/17 the FCA sets out proposals to introduce climate-related financial disclosure rules and guidance for asset managers, life insurers, and FCA regulated pension providers, consistent with the TCFD’s recommendations and recommended disclosures. In particular, the FCA is introducing a new ‘Environmental, Social and Governance (ESG) Sourcebook’ in the FCA Handbook to set out its proposed rules and guidance.
The key elements of the FCA’s proposals are:
- Entity-level disclosures. Firms would be required to publish, annually, an entity level TCFD report on how they take climate-related risks and opportunities into account in managing or administering investments on behalf of clients and consumers. These disclosures must be made in a prominent place on the main website for the firm’s business, and would cover the entity-level approach to all assets managed by the UK firm.
- Product or portfolio-level disclosures. Firms would be required to produce, annually, a baseline set of consistent, comparable disclosures in respect of their products and portfolios, including a core set of metrics. Depending on the type of firm and/or product or portfolio, these disclosures would either be:
- published in a TCFD product report in a prominent place on the main website for the firm’s business, while also being included, or cross-referenced and hyperlinked, in an appropriate client communication; or
- be made upon request to certain eligible institutional clients.
CP21/18
In December 2020, the FCA took its first step in implementing a new disclosure rule for commercial companies with a UK premium listing, referencing the TCFD’s recommendations. The new disclosure rule was finalised in Policy Statement 20/17. In CP21/18 the FCA is extending the application of the requirements for premium listed companies to a wider scope of issuers, consistent with the commitments in the Roadmap.
Specifically, the FCA is proposing to bring a new rule into effect for issuers of standard listed equity shares (excluding standard listed investment entities and shell companies). Under its proposal, the FCA would require issuers of standard listed equity shares to include a statement in their annual financial report setting out:
- whether they have made disclosures consistent with the TCFD’s recommendations and recommended disclosures in their annual financial report;
- where they have not made disclosures consistent with some or all of the TCFD’s recommendations and/or recommended disclosures, an explanation of why, and a description of any steps they are taking or plan to take to be able to make consistent disclosures in the future and the timeframe within which they expect to be able to make those disclosures;
- where they have included some, or all, of their disclosures against the TCFD’s recommendations and/or recommended disclosures in a document other than their annual financial report, an explanation of why; and
- where in their annual financial report (or other relevant document) the various disclosures can be found.
The FCA has also included a discussion component in CP21/18 where it is asking for views on select ESG topics in capital markets. The FCA is specifically looking to generate discussion and engage stakeholders on issues related to green, social or sustainable debt instruments and ESG data and rating providers.
Deadline for comments
The deadline for comments on CP21/17 and CP21/18 is 10 September 2021.
The FCA aims to publish Policy Statements later this year.