The FCA said: “Better corporate disclosures will help inform market pricing and support business, risk and capital allocation decisions. 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 new rules for standard listed issuers (58-page / 800KB PDF) do not apply to issuers of standard listed debt and debt-like securities, though the FCA has said it will further explore the introduction of “a proportionate and effective regime” on climate-related disclosures for those businesses at a later date.
Oliver Crowley of Pinsent Masons, an expert in the regulation of investment funds, said: “In scope asset managers and financial market participants will need to consider carefully their disclosure obligations under the new rules and how these will be presented. The FCA has acknowledged that there is a balance to be struck on achieving perfect methodologies and disclosures and ‘getting started’.”
“Given the limited data that may be available initially to asset managers in certain contexts and asset classes, the FCA has opted for a comply or explain approach to the extent data is not available and also requires the disclosure of the steps firms will take to improve the quality and completeness of the disclosures. The initially proposed best efforts disclosure obligation has been softened to be ‘as far as reasonably practicable’ taking into account ‘time, costs, resources and practicalities’, but what this means in practice will not be without its challenges until market practice settles,” he said.
In addition to announcing the new rules, the FCA has updated its own guidance in a bid to increase transparency over businesses’ ‘net zero’ transition plans.