In September 2021, the Institute submitted its response to the Financial Conduct Authority’s (FCA) consultation papers CP21/17 and CP21/18 on enhancing climate-related disclosures.
The FCA is proposing a climate-related financial disclosure regime for asset managers, life insurers and FCA-regulated pension providers consistent with the Task Force on Climate-Related Financial Disclosures’ (TCFD) recommendations. Their proposals aim to increase transparency and enable clients and consumers to make considered choices, while remaining proportionate for firms. The FCA is also consulting on proposals to extend the application of our climate-related disclosure requirements to issuers of standard listed equity shares, as well as seeking views on select environmental, social and governance (ESG) topics in capital markets.
The Institute strongly welcomes these timely consultations and the FCA’s commitment to widening the applicability of its requirement to make climate-related disclosures. To comprehensively and credibly promote complete, consistent and decision-useful disclosures to investors, clients and consumers, we believe that the FCA must broaden its focus from climate-related disclosures alone, and look to establish reporting and bond standards that also take account of the social impact of market participants, and the interrelationship between environmental and social issues.
In response to the consultation, we make three key recommendations:
- Require listed companies, asset managers, life insurers and FCA-regulated pension providers (referred to hereafter as ‘market participants’) to report on ‘S’ factors, as well as ‘E’ factors.
- Align the reporting standards it requires to the concept of ‘double materiality’.
- Separately, create a comprehensive bond standard that recognises the social co-benefits generated by green bonds.
See more details in our full response below.