UK financial watchdog proposes broader scope for climate disclosure

© Reuters. FILE PHOTO: Smoke and steam billow from Belchatow Power Station, Europe's largest coal-fired power plant, near Belchatow, Poland. Picture taken November 28, 2018. REUTERS/Kacper Pempel/File Photo

By Huw Jones

LONDON (Reuters) -Britain's financial watchdog on Tuesday proposed that a far wider range of companies should adopt globally accepted standards for disclosing the impact of climate change on their business.

The government wants to make it easier for investors to pick environmentally friendly companies to help Britain achieve a net-zero economy by 2050.

Since December 2020, companies listed on the London Stock Exchange's premium segment use climate-related disclosures as written by the global Taskforce on Climate-related Financial Disclosures, or TCFD, which Britain is making mandatory by 2025.

The Financial Conduct Authority said it was proposing to extend the use of TCFD disclosures to companies with a standard listing, asset managers, life insurers and FCA-regulated pension providers.

"The proposed rules are designed to help make sure that the right information on climate-related risks and opportunities is available along the investment chain – from companies in the real economy, to financial services firms, to clients and consumers," the FCA said in a statement.

The proposals are among the first at the FCA since Britain fully left the EU in December last year and have been designed with the global nature of financial firms in mind, the watchdog said.

The public consultation ends in September with final rules in place before the end of 2021.

The wider scope will cover 98% of assets under management in the UK, worth around 12.1 trillion pounds.

Firms would have to publish annually how they take climate-related risks and opportunities into account generally and in their products.

"It is crucial that the FCA supports the industry by implementing challenging but achievable disclosures, ensuring that these are seen as a fundamental part of the transition to a low carbon economy and not as a marketing badge," said Laura Houet, a financial services partner at CMS law firm.

The global application of TCFD has been mixed given its voluntary nature.

To increase global consistency and spread of disclosures, world leaders have asked the IFRS foundation, which writes accounting rules used in over 140 countries, to set up a body to write global sustainability standards based on TCFD.