After much anticipation, the FCA published its consultation (CP21/17) on climate-related financial disclosures and rules for UK asset managers at the end of June. Objectives include increasing transparency and competition as well as stimulating the flow of capital towards firms that are better managers of climate risks and opportunities.
The FCA will ensure that the new requirements are in line with existing UK and international disclosure regimes, but firms operating cross-border in the EU will have to do an additional element of reporting.
Who is in-scope of CP21/17
- Firms managing investments and giving investment advice
- Certain life insurers and FCA-regulated pension providers referred to as ‘asset owners’
Who is out of scope of CP21/17
- Asset managers and asset owners with less than £5bn assets under management (AuM) or administration on a 3-year rolling average. In other words – only 2% of the asset management market in the UK
What is proposed
#1 the TCFD entity report
This is a public report stating the need for firms to publish information in a visible place on their websites. The report must cover how firms handle climate-related risks and opportunities for the portfolio of assets managed for their clients.
#2 the TCFD product report
This report sets out the rules regarding the annual disclosure of information as it applies to products and portfolios. This includes the inclusion a core set of metrics. As above, this needs to be publicly accessible, in a visible place on the firm’s website. For UK AIFMs and discretionary portfolio managers, the report is meant to be provided on request only.
What about implementation
The new rules are expected to apply first to UK asset managers with more than £50bn AuM, and asset owners with £25bn or more AuM, with a first publication deadline of 30th June 2023.
The remaining asset managers and assets owners, with over £5bn AuM, will have a first publication deadline of 30th June 2024.
How are cross-border firms affected
The FCA announced that the new requirements have considered international requirements, including the SFDR. They also state that the FCA will continue its consideration of the impact of the interaction between the UK and EU rules as the policy is developed further.
These FCA proposals take a similar approach to that of the SFDR. Under the FCA rules, a firm will be permitted to cross-reference relevant disclosures made in other reports. However, the FCA emphasise that they refer to TCFD-compliant reports (and not SFDR or other models). This would mean that UK firms that are also subject to the SFDR rules would have to comply with the UK and EU rules in parallel
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