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FCA consults on tighter climate disclosure and “topical ESG issues”

FCA TCFD consultation asset managers insurersThe UK financial regulator is seeking to toughen climate-related disclosures for asset managers, saying the current system did not meet investor needs.

The Financial Conduct Authority (FCA) is consulting on proposals for listed companies and certain regulated firms, including asset managers, who could see ‘TCFD-aligned’ disclosure requirements put on them.

TCFD - or Taskforce on Climate-related Financial Disclosures – refers to a set of  recommendations published in 2017 and provide a framework for companies to disclose how climate-related risks and opportunities could impact their businesses.

Pension funds and insurers are also included in the proposed tighter disclosure regime.

Also in the consultation that runs until September 10, the FCA is seeking views on other topical environmental, social and governance issues in capital markets, including on green and sustainable debt markets and the “increasingly prominent role of ESG data and rating providers”.

Sheldon Mills, executive director of consumer and competition at the FCA said: “Managing the risks of climate change and transitioning to a cleaner and less carbon-intensive economy will require high quality information on how climate-related risks and opportunities are being managed throughout the investment chain.

“However, climate-related disclosures do not yet meet investors’ and market participants' needs. The new rules will help markets, investors and ultimately consumers better understand the impact of climate change and make more informed decisions.” 

The proposals are 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, the regulator said.

Gareth Mee, UK sustainable finance consulting leader at EY, said: “This is a clear signal from the financial regulator that climate-related disclosures need to improve. A more standardised approach would represent a big step forward and help roll out a wider reaching programme of disclosure across the financial services market – notably bringing into scope key parts of the market that have yet to fully engage. Consistency will be the key to success; creating a foundation to build upon, measure against and hold companies to account from.”

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