FCA unveils final rules on TCFD requirements

December 24, 2021

The Financial Conduct Authority (FCA) has published a set of final rules requiring investment managers, pension funds, life insurers and publicly listed companies to provide disclosures aligned to the Taskforce on Climate-related Financial Disclosures (TCFD).

The policy documents, which are set for implementation as soon as January 1 for large companies, follow a consultation launched by the regulator to ensure high-quality information on climate-related risks and opportunities along the investment chain.

Final rules require asset managers and owners – investment managers, pension funds and insurance companies – to make annual disclosures that set out how they take climate matters into account when managing or administering investments on behalf of clients and consumers, as well as at product level.

Disclosures on a firm’s products and portfolios should be included or cross-referenced inappropriate client communication or made upon request to eligible institutional clients, according to the policy document.

Asset managers and owners will undergo a phased implementation of the rules, which will initially apply to the largest firms and will come into effect for smaller firms in early 2023.

“Better corporate disclosures will help inform market pricing and support business, risk and capital allocation decisions,” said the FCA in a statement.

“And improved disclosures to clients and consumers will help them make more informed financial decisions. This, in turn, will strengthen competition in the interests of consumers, protecting them from buying unsuitable products and driving investment towards greener projects and activities.”

The FCA is the first securities regulator to introduce mandatory TCFD-aligned disclosure requirements for asset managers and owners.

The measurements are part of the UK Government’s plan to introduce TCFD-alignment across the economy by 2025, as well as the UK’s wider net zero commitment.

The regulator has said it intends to build on the new rules as it contributes to the implementation of the Government’s Roadmap to Sustainable Investing.

TCFD alignment is rapidly building speed, with Canadian Prime Minister, Justin Trudeau, also announcing this week that his finance and environment ministers must push for TCFD alignment.