Briefly
The Monetary Conduct Authority (FCA) has stated following its latest multi-firm evaluate of how its local weather disclosure guidelines have been working that it’ll look to “streamline and improve” its sustainability reporting framework and has pledged to “simplify disclosure necessities”. That is welcome information for the business and appears to be pushed by suggestions from the asset administration sector that Process Power on Local weather-related Monetary Disclosures (TCFD) reporting guidelines are overly granular. There additionally appears to be a transfer in the direction of consolidation throughout UK sustainability reporting frameworks because the FCA will contemplate the Sustainability Disclosure Necessities (SDR), Worldwide Sustainability Requirements Board (ISSB) and transition planning going ahead.
The FCA is aiming to streamline its sustainability reporting framework following its multi-firm evaluate of how its local weather disclosure guidelines have been working for asset managers, life insurers and FCA-regulated pension suppliers so far.
The FCA launched its findings on 6 August 2025. Key factors arising from the evaluate are as follows:
- The headline final result of the evaluate is that the FCA is desiring to “streamline and improve” its sustainability reporting framework, and has pledged to “simplify disclosure necessities”, which is nice information for the business. This partly appears to be pushed by suggestions from the asset administration sector that TCFD reporting guidelines are overly granular, and that there’s presently complexity arising from a number of sustainability disclosure regimes within the UK.
- There additionally appears to be a transfer to consolidate reporting throughout UK sustainability reporting frameworks, or not less than to contemplate it within the spherical, with the FCA noting that it “will contemplate sustainability reporting as a complete” going forwards, together with the SDR, ISSB, and transitioning planning.
- Different sensible factors to notice are as follows:
- There isn’t a indication of an extension within the scope of TCFD reporting to a wider vary of companies at this stage;
- Corporations ought to stay on high of ISSB reforms the place relevant (noting that the UK authorities is presently consulting on proposed amendments as a way to finalise UK SRS S1 and UK SRS S2);
- The UK asset administration sector nonetheless seems to be discovering its approach with respect to situation evaluation and quantifying the potential influence of local weather danger on the longer term valuation of portfolio property. The FCA famous that solely round half of the product reviews it reviewed disclosed the influence of all three local weather situations on the related fund, as required, which restricted comparability between reviews; and
- The FCA notes considerations round ease of entry to information, with product reviews being difficult to find. This goes over related floor to the FCA’s feedback in its 2023 evaluate into the design, supply and disclosure of ESG and sustainable funding funds, the place the FCA noticed that cross-references showing in disclosure paperwork had been typically unclear, with cross-referenced info not linked collectively in a transparent and coherent approach. At the moment, the FCA cautioned that key info was not the place the regulator would have anticipated it to be, and in some circumstances it was essential to cross-refer between a number of paperwork to seek out it. With this in thoughts, managers within the ESG house ought to proceed to remain on high the way in which they current and make accessible ESG information.
Background
- The FCA finalised its local weather disclosure guidelines in 2021, which require asset managers and different FCA-regulated asset homeowners to make obligatory disclosures in step with suggestions from the TCFD.
- The disclosure necessities comprise an entity-level TCFD report wherein companies set out how they contemplate climate-related dangers when managing or administering investments and a product or portfolio stage report, which includes a set of comparable disclosures in relation to merchandise and portfolios together with a core set of metrics.
- The TCFD reporting necessities got here into impact on 1 January 2022 for asset managers with property beneath administration in extra of GBP 50 billion, with the deadline for first public disclosures occurring on 30 June 2023. For smaller asset managers with property in extra of GBP 50 billion, the reporting necessities got here into impact on 1 January 2023.
- TCFD reporting necessities apply not solely to UK Various Funding Fund Managers (AIFMs) and Undertakings for Collective Funding in Transferable Securities (UCITS) Administration Firms (ManCos), but in addition to portfolio administration companies (with life insurers and pension suppliers being topic to an analogous algorithm).
- The FCA carried out its evaluate of 10 TCFD entity reviews and 77 TCFD product reviews from eight companies. It additionally liaised with commerce associations and 7 companies in-scope of the TCFD guidelines.
Findings
The FCA had the next findings:
| Findings | Particulars |
| Danger administration | The FCA was broadly optimistic about its influence on danger administration, noting that companies discovered that the foundations had helped them contemplate local weather change as a cloth danger, construct their capabilities and combine local weather dangers and alternatives into their methods |
| Viewers | Corporations famous that whereas detailed local weather disclosure was helpful for institutional traders, this was much less of the case for retail traders who discovered it too overwhelming; many companies reported restricted engagement from retail traders with their TCFD reviews, particularly at a product stage |
| Accessibility | In contrast to entity reviews, which had been accessible by means of companies’ essential webpage, product reviews had been typically tough to seek out, which the FCA famous might have contributed to the restricted response from retail traders |
| Knowledge | Whereas companies had been capable of report on backward-looking information, for instance carbon emissions, forward-looking disclosures akin to situation evaluation had been tougher due to the shortage of quantitative information, and the FCA additionally famous that solely round half of the product reviews it reviewed disclosed the influence of all three local weather situations on the fund, as required, which restricted comparability between reviews |
| Proportionality | Asset administration companies specifically discovered the TCFD necessities too granular and instructed that sustainability disclosures might be streamlined |
| Regulatory readability | Corporations sought readability about the way forward for the FCA’s TCFD guidelines and emphasised the significance of alignment with worldwide guidelines |
Subsequent steps
- While the result of the evaluate is that the FCA is desiring to “streamline and improve” its sustainability reporting framework, there may be as but restricted info on how this will likely be achieved.
- Nevertheless, the FCA has so far up to date its sustainability reporting necessities webpage to supply extra steering to companies that want to stick each to its TCFD and Sustainability Disclosure Necessities guidelines.
- As a part of its efforts to streamline its sustainability reporting framework, the FCA stated it could interact additional with business on its subsequent steps.
- The FCA additionally singled out the necessity to promote worldwide alignment. Whereas the UK grew to become the primary G20 nation to make TCFD reporting obligatory in 2022, the TCFD has since been disbanded with the ISSB taking on its obligations.
- In June, the UK authorities launched a session on implementing sustainability reporting requirements primarily based on these of the ISSB. The session closes in September.
Thomas Blott, Trainee Solicitor, has contributed to this authorized replace.
