Monday 5 October 2020

Financial Conduct Authority outlines landmark climate risk reporting measures

The Financial Conduct Authority (FCA) is to launch a raft of landmark climate risk reporting measures by the end of 2022.

In a letter to Pensions Minister Guy Opperman, the FCA said it intends to consult on implementing consistent climate-related disclosure requirements for asset managers and FCA-regulated pension schemes in the first half of 2021.

This will be carried out in line with recommendations from the internationally-recognised Taskforce on Climate-related Financial Disclosures (TCFD).

It plant to finalise the rules by the end of 2021, subject to consultation and cost-benefit analysis as required under the Financial Services and Markets Act, with new obligations coming into force in 2022 - the obligations will potentially be rolled out in a phased approach, beginning with the largest or most interconnected firms.

The Department for Work and Pensions' ongoing consultation to improve the governance and reporting by occupational pension schemes proposes a wide range of measures to introduce this.

Activities include calculating the carbon footprint of pension schemes and assessing how the value of the schemes' assets or liabilities would be affected by different temperature rise scenarios – including the ambitions on limiting the global average temperature rise set out in the Paris Agreement.

The Pension Schemes Bill, set for Second Reading on 7th October 2020, contains the legislation necessary to enact these measures.

Mr Opperman welcomed the plans, stating: “I whole-heartedly welcome the steps outlined by the FCA to ensure climate reporting requirements are rolled out across its regulated community. The FCA's commitment highlights the co-ordinated approach we are taking the address the dangers of climate change, while also using it to seize green opportunities.

“The UK was the first major economy to commit to reaching net zero by 2050 and it is vital we continue to build on this momentum.”