The Financial Conduct Authority (FCA) has released the findings of its multi‑firm review into climate‑related reporting practices among asset managers, life insurers, and FCA‑regulated pension providers. The review assessed how well firms are adhering to the FCA’s mandatory disclosure rules aligned with the Task Force on Climate‑related Financial Disclosures (TCFD).
The FCA found that the disclosure regime has effectively encouraged firms to incorporate climate risk into their strategic planning and to enhance transparency for clients and consumers. This marks progress in the integration of climate considerations across the financial sector.
However, the review also highlighted several key issues:
- Data and Reporting Complexity: Many firms struggle to provide forward‑looking information such as scenario analysis, indicating a challenging and resource‑intensive process.
- Accessibility Concerns: Product-level disclosures tend to be dense and less accessible to retail investors, contrasting with more digestible entity-level reports.
- Overlapping Requirements: Firms cited the burden of managing multiple sustainability frameworks, calling for more proportionate and unified requirements.
In response, the FCA announced plans to explore ways to streamline its climate reporting framework. Options under consideration include aligning more closely with the International Sustainability Standards Board (ISSB) and re-evaluating its Sustainability Disclosure Requirements (SDR) to reduce complexity and regulatory overlap.
These disclosure rules were introduced through Policy Statement PS21/24 in December 2021, requiring firms to make annual climate‑related disclosures at both entity and product levels, consistent with TCFD principles. The rules applied from January 2022 for larger firms and from 2023 for smaller entities.
The FCA will continue engaging with industry participants, trade bodies, and government stakeholders to reshape its disclosure strategy. The goal is to uphold transparency and climate resilience, while ensuring reporting remains manageable and effective for both firms and investors.
