FCA introduces new climate-related disclosure rules

Companies will be required to include a statement in their annual financial report which sets out whether their disclosures are consistent with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), and to explain if they have not done so.

The TCFD recommends that firms disclose their governance around climate-related risks and opportunities, outline actual and potential impacts of such risks, disclose how it identifies and manages the risks, and release targets for assessing how these risks are managed.

The FCA says that encouraging issuers to make more comprehensive climate-related financial disclosures should reduce the risk of consumers buying unsuitable or mis-sold products and fill product gaps by enabling financial services firms to develop products that meet consumers’ climate-related preferences.

It also aims to enhance market integrity due to better informed asset pricing and more accurate valuation of issuers’ securities and support more effective competition between firms.

The rule will apply for accounting periods beginning on or after 1 January 2021, meaning the first annual financial reports subject to our rule would then be published in spring 2022.

The rule will apply to premium-listed advice firms including Quilter, Charles Stanley, Hargreaves Lansdown, Aviva, and HSBC.