New UK Climate Disclosure Rules

• Published date: 29 June 2021
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Environment, Financial Services, Fund Management/ REITs, Corporate and Company Law, Corporate Governance, Environmental Law
• Law Firm: Akin Gump Strauss Hauer & Feld LLP
• Author: Ms Ezra Zahabi, Helen Marshall and Weyinmi Popo

The Financial Conduct Authority (FCA) has issued consultation papers (please see here and here) introducing new mandatory climate-linked disclosure requirements. The proposals are consistent with the "roadmap" published by the UK Government, which set out the objective to achieve mandatory climate-related disclosures across the UK economy by 2025. The disclosures will be aligned with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD). While the proposals presently relate solely to climate-related disclosures, it is anticipated that the rules will over time be expanded to include requirements on other climate-related and wider Environmental, Social and Corporate governance (ESG) topics.

The rules will apply to FCA-authorised asset managers (Authorised Fund Managers, Alternative Investment Fund Managers, UCITS Management Companies) and certain investment advisers, life insurers, certain pension providers and standard listed companies. The new rules echo the disclosure requirements issued by the UK Department of Works and Pensions on the trustees of occupational pension schemes. This post focuses on the requirements applicable to asset managers and standard listed companies.

The rules are principles-based, allowing for variation in the quality and availability of data, as well as innovation and evolution of the disclosure methodologies and the metrics applied to provide information that, over time, becomes more accurate and focused. The FCA recognises that, initially, the limited availability of meaningful data may require the use of assumptions and proxy data, as appropriate.

Disclosure Requirements for Asset Managers

The key disclosure items include entity-level and product-level disclosures. With respect to asset managers, the requirements include an annual manager-level TCFD report on how they take climate-related risks and opportunities into account in managing or administering investments on behalf of clients and consumers. The report must be published on the manager's website; and product-level disclosures which must either be included in the relevant client communications and published on the manager's website, or be made available on request (with respect to discretionary portfolio management arrangements). Asset managers will also be required to produce annually a baseline set of consistent, comparable disclosures in respect of their products and portfolios, including a core set of...