FCA focuses on climate change disclosures

The Financial Conduct Authority (FCA) is consulting on climate-related disclosure requirements for premium listed issuers

The proposed 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.

Specifically, premium-listed companies will be required to include a statement in the annual report setting out whether they have made disclosures consistent with the TCFD’s recommendations and recommended disclosures in their annual report.

In cases where they have not done so, or where some of the disclosures are included in a document which is not the annual report, companies will be required to explain why this is so, and also provide evidence of where the information is reported. 

The FCA will consider consulting on extending this rule to a wider scope of issuers.

The regulator is also seeking feedback on clarifications to how existing requirements applicable to all listed companies set out in EU legislation and in its handbook already require climate, and other sustainability, related disclosure.

The FCA says it 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.'

FCA launched the Climate Financial Risk Forum jointly with the Bank of England’s Prudential Regulation Authority in March last year, with the aim of helping to build disclosure capabilities.

The Forum is set to publish industry guidance soon, covering climate-related disclosures, risk management, scenario analysis and innovation. These guidance materials are 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 new rule is proposed to take effect for accounting periods beginning on or after 1 January 2021, meaning the first reports issued in compliance with the requirements would be published in 2022.

The consultation period closes on 5 June 2020.

CP20/3: Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations

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