FCA publishes climate-related disclosure obligations for asset managers, life insurers, and FCA-regulated pension providers

By Zhuan Faraj

On 17 December 2021, the FCA published PS 21/24: Enhancing climate related disclosures by asset managers, life insurers, and FCA-regulated pension providers (the “Policy Statement”).

The Policy Statement introduces new rules and guidance for asset managers and certain FCA-regulated asset owners to make mandatory disclosures consistent with the TCFD’s recommendations on an annual basis at:

• Entity level – an entity-level TCFD report setting out how they take climate-related risks and opportunities into account in managing or administering investments on behalf of clients and consumers.
• Product or portfolio level – a baseline set of consistent, comparable disclosures in respect of their products and portfolios, including a core set of metrics.

These rules aim to increase transparency on how firms are managing climate-related risks and opportunities and enable clients and consumers to make considered choices, while also remaining proportionate. In turn, the FCA states, this will help to enhance competition in the interests of consumers, protect consumers from unsuitable products, and drive investment towards greener projects and activities.

The Policy Statement forms part of a broader strategic aim to promote transparency on climate change and wider sustainability along the value chain. The FCA’s work in this area supports the UK’s commitment to mandatory TCFD-aligned disclosure obligations across the UK economy by 2025. In finalising its rules, the FCA has also had regard to the Government’s net zero commitment, in line with the Government’s expectations.

This Policy Statement will directly affect:

• asset managers
• life insurers (including pure insurers)
• non-insurer FCA-regulated pension providers, including platform firms and Self-invested Personal Pension (SIPP) operators
• FCA-regulated pension providers

The new climate-related disclosure rules will apply from 1 January 2022 for the largest in-scope firms and one year later for smaller firms above the £5 billion exemption threshold. The first public disclosures in line with the FCA’s requirements must be made by 30 June 2023.

In its press release, the FCA states “firms that are directly affected should familiarise themselves with the details of the rules and associated guidance, and consider what arrangements they need to ensure that they are able to meet the requirements.”

See our Sustainable Finance page for an overview of Burges Salmon’s work in this space and relevant contacts.