FCA finalises overhaul of product-level climate reporting rules

The Financial Conduct Authority (FCA) has finalised an overhaul of its product-level climate disclosure rules which it estimates will save firms around £20m a year.

The regulator is removing requirements for asset managers, life insurers and FCA-regulated pension providers to produce detailed public product-level reports based on the Task Force on Climate-related Financial Disclosures (TCFD) framework.

Instead, firms serving retail clients will be required to assess whether climate-related risks could have a material impact on a product’s financial performance and include relevant risks in existing communications covering risk and returns.

For institutional clients, firms will be required to provide Scope 1, 2 and 3 greenhouse-gas emissions data on request where clients need it to meet their own climate-related reporting obligations.

The final rules took effect on 25 September, following a consultation in June. The FCA estimates the removal of existing product-level reporting requirements will save around £20m annually across 261 asset managers and 34 asset owners, covering roughly 9,000 products.

Consultation respondents frequently cited low use of product-level reports among retail investors, as well as high costs and complexity, as reasons for replacing the existing rules.

Michelle Beck, director of wholesale buy-side at the FCA, said when the reforms were proposed in June that they were intended to cut complexity for asset managers while maintaining “clear, useful information for investors”.

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