FCA changes climate-related disclosure requirements for commercial companies

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THE FINANCIAL Conduct Authority has published proposals outlining new climate-related disclosure requirements for premium-listed issuers.

The new rule will require all commercial companies with a premium listing to either make climate related disclosures consistent with the existing global standard or explain why not.

Andrew Bailey, Chief Executive of the Financial Conduct Authority, commented on the announcement: “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 Financial Conduct Authority 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 Taskforce on Climate-related Financial Disclosures.

The Financial Conduct Authority is also seeking feedback on clarifications to how existing requirements applicable to all listed companies already require climate- and other sustainability-related disclosure.

The Authority 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 as to why.

The work of the Climate Financial Risk Forum – an industry group that the Authority 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 Taskforce on Climate-related Financial Disclosures’ recommendations and will complement the proposed new rule.

The Authority is also considering how best to enhance climate-related disclosures by regulated firms, including asset managers and life insurers, to ensure a coordinated approach.

This also involves 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.