FCA pioneers TCFD-aligned disclosure rules for asset managers

Asset managers and issuers alike will be expected to provide investors with enhanced climate risk disclosures in the year ahead, said the U.K.’s Financial Conduct Authority (FCA) today.

In a pair of policy statements, the FCA confirmed final rules and guidance that aim to improve climate-related financial disclosures.

Under the rules, which take effect on Jan. 1, 2022, issuers will be expected to report whether their disclosures meet the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), on a comply or explain basis.

Additionally, asset managers and institutional investors — such as pension funds and insurance companies — will have to disclose how they incorporate climate-related risks and opportunities into their investment management processes.

And, they’ll have to make disclosures about the climate-related attributes of their products, the FCA statements said.

The new requirements will be phased in for asset managers, starting with large firms and applying to smaller firms in a year’s time.

The FCA said it’s the world’s first securities regulator to introduce mandatory TCFD-aligned disclosure requirements for asset managers and owners.

Earlier this year, the Canadian Securities Administrators (CSA) proposed adopting TCFD-based disclosure requirements for issuers, but has yet to make similar demands of investment firms.

In the meantime, various other regulators around the world are also seeking to enhance climate-related disclosure requirements.

For example, on Dec. 16, the U.S. Office of the Comptroller of the Currency (OCC) proposed draft principles for identifying and managing climate-related financial risks at OCC-regulated banks with at least US$100 billion in total assets.

The OCC said that it will use feedback to inform future guidance on climate-related financial risk disclosure requirements. The deadline for that consultation is Feb. 14, 2022.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.