The Financial Conduct Authority (FCA) has published a policy statement confirming the final rules and guidance on climate-related financial disclosures for asset managers, life insurers and FCA-regulated pension providers.

The rules will apply from 1 January 2022 for the largest in-scope firms and from January 2023 for smaller firms above the £5bn exemption threshold.

They aim to support the transition to a low-carbon economy and are consistent with the Task Force for Climate-related Disclosures’ (TCFD) recommendations.

The FCA confirmed that the proposals outlined in its consultation will be put into place with 'a few' changes following respondent feedback.

Firms will be required to annually publish an entity-level TCFD report on how they take climate-related risks and opportunities into account in managing or administering investments.

They would also be required to produce, on an annual basis, a baseline set of consistent and comparable disclosures in respect of their products and portfolios, including a core set of metrics.

The FCA noted that it would be introducing a new ESG Sourcebook to the FCA Handbook containing the rules and guidance for relevant asset managers and owners to make disclosures consistent with the TCFD’s recommendations.

Following feedback, the FCA made some changes to the rules, including the addition of further rules and guidance to clarify that firms will not be required to disclose information if data gaps or methodological challenges cannot be addressed through proxies and assumptions.

Furthermore, it will only mandate disclosures of core metrics using TCFD methodologies, and it amended the ‘on demand’ obligation to require that firms provide a report to clients at a single reference point consistent with public disclosures, or at date agreed between the client and the firm, and in a ‘reasonable’ format.

The regulator noted that the industry was still developing in terms of data, methodologies and guidance, with some stakeholders calling for technical and sector or asset class-specific guidance in certain areas.

It encouraged an industry-led approach to developing such guidance and said it would continue to engage with the work.

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