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Climate finance | 10th September 2021

ClientEarth response to FCA consultation on climate-related disclosures for asset managers, life insurers and pension providers (CP21/17)
Climate finance

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ClientEarth response to FCA consultation on climate-related disclosures for asset managers, life insurers and pension providers (CP21/17)

ClientEarth response to FCA consultation on climate-related disclosures for asset managers, life insurers and pension providers (CP21/17)

The UK’s Financial Conduct Authority (FCA) has consulted on proposals to clarify and enhance climate-related disclosure requirements for asset managers, life insurers and FCA-regulated pension providers (consultation CP21/17). The FCA has consulted separately on enhancing climate-related disclosures for standard listed issuers (see our response here).

The FCA’s proposals would require firms which manage at least £5 billion in assets to disclose information in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) at an entity level, as well as ‘product-level’ disclosures on the climate risks of individual investment products. Notably, this would include a requirement for firms to publish transition plans, in line with the TCFD’s recent consultation (see also our response).

ClientEarth welcomes the proposed extension of climate-related disclosures to asset managers, life insurers and pension providers, and supports the introduction of product-level disclosures. However, the proposals do not go far enough. In our response, we propose a number of enhancements to the FCA’s proposals in order to ensure that consumers, investors and other stakeholders receive the granular detail they need and are entitled to expect to make informed decisions, including:

  • Transition plans: While we support the FCA’s proposals to require in-scope firms to disclose transition plans, we call on the FCA to specify that transition plans must be aligned at a minimum with the temperature goals of the Paris Agreement and the UK Government’s emissions reduction commitments, in line with the best available science.
  • Enforcement: We call on the FCA to procure that it is adequately empowered and resourced to hold laggards accountable for failures to satisfy climate change-related reporting obligations, and must commit to taking such action.
  • Scope: The scope of companies to which the new rules should apply must be expanded:
    • the new ‘entity-level’ disclosures should be a requirement for all FCA-regulated firms of all sizes. The FCA should not miss this opportunity to roll out climate-related disclosures across the whole financial sector.
    • the product-level disclosures should apply to asset managers, life insurers and pension providers of all sizes (i.e. removing the £5 billion or over assets under management threshold).
  • Timing: The deadline for companies to report under the new requirements of CP21/17 should be brought forward, in view of the urgency with which climate action must be taken. The rules should apply for periods beginning January 2022 (instead of the FCA’s current proposal to extend to some companies only from January 2023).

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