FCA climate risk disclosure consultation briefing

The Financial Conduct Authority (FCA) is currently consulting on proposals to clarify and enhance climate-related disclosures by listed issuers in the UK (see here). The deadline to respond to the consultation is 1 October 2020.

This briefing sets out ClientEarth’s six key recommendations for improving the FCA’s proposals to clarify and enhance climate-related disclosures. In summary, we believe that in order to ensure that investors and consumers have the information they need, the FCA must:

1. make the new ‘climate rule’ mandatory, and avoid a confusing ‘comply or explain’ approach
2. apply the new ‘climate rule’ to all issuers, not just those with a premium listing – from 2022
3. amend the ‘climate rule’ to require issuers to disclose a ‘Paris-aligned’ strategy, with a credible plan for how they can achieve ‘net zero’ GHG emissions by 2050 (TCFD+)
4. clarify that relevant materiality tests under existing disclosure laws require issuers to consider and meet investors’ reasonable expectations for decision useful information
5. explain how consistency will be maintained with emerging EU disclosure laws, including those imposed under the EU Non-Financial Reporting Directive (NFRD)
6. confirm what action is being taken to close existing accountability and enforcement gaps

We believe that unless these concerns are addressed, the FCA’s current proposals will lead to slow implementation, lower quality disclosures with greater scope for ‘greenwash’, and increased uncertainty for issuers, investors, and consumers. We welcome discussion on these matters and strongly encourage other stakeholders to consider and adapt these points in preparing their own responses to the consultation.