The FCA's rules on climate-related financial disclosures for asset managers, life insurers and FCA-regulated pension providers started to come into force from 1 January 2022 following publication by the FCA of its Policy Statement and final rules in December 2021.  

As we reported in our July Update, the disclosures are aligned with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD).  The rules cover life insurers in relation to insurance-based investment products and defined contribution pension products.  Non-insurer SIPPs are in scope to the extent that they provide a ready-made selection of investments.  Firms that have less than £5 billion in assets under management or administration on a 3-year rolling average are exempt, with the exemption threshold subject to review after three years of disclosures.

Disclosures will have to be made at two levels:

• "entity level", ie how a firm takes climate-related risks and opportunities into account; and
• product or portfolio level.

Timing of implementation

From 1 January 2022 the rules came into force for asset managers with assets under management of more than £50 billion, and life assurance companies and non-insurer SIPP operators with £25 billion or more in assets under management or administration in relation to in-scope business.  The publication deadline for first disclosures will be 30 June 2023 with subsequent disclosures to be made by 30 June each year.

From 1 January 2023 the rules will take effect for remaining firms above the £5 billion threshold.  The first publication deadline will be 30 June 2024, with subsequent disclosures to be made by 30 June each year.

Changes following consultation

In response to feedback, the FCA has made the following changes to its original proposals:

• firms will not be required to disclose information if data gaps or "methodological challenges" cannot be addressed through the use or proxies or assumptions, or if this would result in misleading disclosures;
• the FCA had originally proposed that where a firm's clients need information to satisfy their own financial disclosure obligations, those disclosures should be made to the client on request once a year. The FCA has amended the requirements in relation to "on demand" disclosures to require that firms provide a report to clients "at a single reference point consistent with public disclosures", or at a date agreed between the client and the firm and in a "reasonable" format.  It has made the change in response to firms being concerned at the demands of responding to multiple requests for disclosures "on demand" at different reference points and in different formats;
• the FCA had originally proposed that in addition to the “core” metrics set out in the TCFD, product-level reports should also include disclosures on certain additional metrics on a “best efforts” basis. Following feedback, the final rules now require these additional disclosures “as far as reasonably practicable” and not on a “best efforts” basis.