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The FCA takes its next step in climate-related financial disclosures

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By Jonathan Brogden & Annabel Walker


Published 11 January 2022


New FCA rules on climate-related financial disclosures came into effect on 1 January 2022.  The new rules affect issuers of standard listed shares and FCA regulated asset managers and asset owners.


  • Issuers of standard listed shares, or equity shares represented by certificates (global depositary receipts), must now include a statement in their annual financial reports setting out whether their disclosures meet the recommendations of the Task Force on Climate-related Financial Disclosures (the “TCFD”). If they do not, they will have to explain why (PS21/23); and
  • FCA regulated asset managers and asset owners, including life insurers and pension providers, will have to disclose how they take climate-related risks and opportunities into account in managing investments. They will also have to make disclosures about the climate-related attributes of their products (PS21/24).

The new rules follow the rules for premium listed commercial companies to make climate-related financial disclosures which applied to accounting periods beginning on or after 1 January 2021 (PS20/17).



The TCFD was set up by the Financial Stability Board in 2015 to improve and increase reporting of climate-related financial information. In 2017 it published its final report which set out 11 recommended disclosures under 4 pillars (governance, strategy, risk management, and metrics and targets).

In October 2021 the TCFD published new Guidance on Metrics, Targets and Transition Plans and an updated implementation Annex. The new guidance recognises that while transition plans are one component of a company’s strategy to address its climate-related risks and opportunities, and therefore are implicitly covered by its 2017 recommendations, the increasing focus on transition plans means that it considers additional guidance, as provided, would be useful.

The TCFD’s recommendations have widespread international support and the UK government has committed to making TCFD-aligned disclosures mandatory across the economy by 2025.


Issuers of standard listed shares (PS21/23)

Issuers that fall under the new rules will need to include a statement in their annual financial reports, for accounting periods beginning on or after 1 January 2022, setting out whether they have made disclosures consistent with the recommendations of the TCFD. If they have not done so, they must explain why and set out any steps they are taking or plan to take to be able to make such disclosures in the future.

The new rules are contained at LR 14.3.27R of the Listing Rules in the FCA Handbook. Guidance provisions are contained at LR 14.3.28G to LR 14.3.31G and refer to the TCFD implementation Annex and other guidance relevant to determining whether a listed company’s climate-related financial disclosures are consistent with the TCFD’s recommendations. The new rules mirror the rules and guidance that apply to premium listed companies introduced last year.

The main change, that will apply to both premium and standard listed issuers, is the incorporation of the TCFD’s Guidance on Metrics, Targets and Transition Plans and updated implementation Annex. The FCA has introduced an additional guidance provision relating to the TCFD’s guidance on transition plans. It sets out that where an issuer is making disclosures of transition plans as part of its strategy disclosures under the TCFD’s recommendations, and is headquartered in, or operates in, a country that has made a commitment to a net zero economy (e.g. UK’s commitment to reach net-zero by 2050 under the Climate Change Act 2008 (Order 2019)), it is encouraged to assess the extent to which it has considered that commitment in developing and disclosing its transition plan. Again, where it has not done so, it is encouraged to explain why.


Asset managers (PS21/24)

The new rules see the introduction of the ESG Environment, Social and Governance sourcebook into the FCA Handbook. They require in-scope asset managers and asset owners to publish two types of reports or disclosures on an annual basis:

  • TCFD Entity Report. Firms are required to publish an entity 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. Firms are encouraged to take reasonable steps to ensure disclosures are consistent with the TCFD’s new guidance, including the disclosure of transition plans.
  • TCFD Product Report. Firms are required to produce, annually, a baseline set of consistent, comparable disclosures in respect of their products and portfolios, including a core set of metrics. The disclosures include Scope 1, 2 and 3 emissions, and where a TCFD product has concentrated or high exposures to carbon intensive sectors, a firm must describe these and disclose a qualitative summary and quantity analysis of how climate change is likely to impact the assets underlying the product, under a “orderly transition”, a “disorderly transition” and a “hothouse world”.

Firms will also be required to produce an on-demand TCFD Product Report or underlying asset data within a reasonable period of time where a client requests such information in order to satisfy climate-related financial disclosure obligations.

The new rules apply from 1 January 2022 for the largest in-scope firms (asset management firms with over £50 billion in assets under management (“AUM”) and asset owner firms with assets over £25 billion) and 1 year later for smaller firms above a threshold of £5 billion in AUM (such threshold to be reviewed after three years of disclosures).

While the FCA acknowledges there may, for a transitional period, be data and methodological challenges, it makes clear that firms should provide sufficient information to clients and consumers and ensure such disclosures remain fair, clear and not misleading.



The new rules form part of the evolving Sustainability Disclosure Requirements as set out in the Government’s October 2021 report Greening Finance: A Roadmap to Sustainable Investing, and its commitment towards mandatory TCFD aligned disclosure obligations across the UK economy by 2025.

The next steps to look out for this year is the outcome of the FCA’s consultation on Sustainability Disclosure Requirements and Investment labels (DP21/4), and the introduction of regulations requiring climate-related financial disclosures within the Companies Act 2000, which, subject to parliamentary approval, are likely to come into force accounting periods beginning on or after 6 April 2022. Further regulations which amend the Limited Liabilities Partnerships Act, and which will mirror the changes made to the Companies Act, should follow shortly after.