Simpler climate reporting rules could save firms £20m annually

Investment firms could save around £20m a year under new proposals from the Financial Conduct Authority (FCA) to simplify climate reporting for investment products. 

The FCA estimates it could deliver these savings by replacing detailed product-level reports based on the Task Force on Climate-related Financial Disclosures (TCFD) with simpler, more targeted information for retail investors, in line with the Consumer Duty.  

The changes aim to give investors clearer insight into how climate risks – such as floods, storms and other extreme weather events – could affect investment performance, while reducing unnecessary costs to firms. 

Michelle Beck, director of wholesale buy-side at the FCA, said: 

“As part of being a smarter, more proportionate regulator, we’re cutting complexity in our rules for asset managers, while keeping the focus on clear, useful information for investors.  

“These proposals will make it easier for firms to communicate with their customers in ways that genuinely inform and engage them.” 

The proposals follow a review of how the current rules are working. The FCA found that while the rules have improved firms’ awareness of climate risks, product-level reports are often seen as too complex by investors and not widely used. 

The FCA is seeking views from asset managers, asset owners, trade bodies, and consumer groups to make sure the proposed rules work in practice and support growth. 

Commenting on new proposals from the FCA to simplify climate reporting for investment products, Carol Thomas, Director, Sustainability and Responsible Investment at The Investment Association, said:

“Sustainability reporting frameworks should prioritise decision-useful disclosures that enables informed choices for investors and stakeholders, while also reducing unnecessary operational burden for asset managers and delivering better outcomes for clients.

“We welcome the FCA’s consultation aimed at streamlining climate reporting as it is an important step towards improving the decision-usefulness of sustainability-related disclosures. We look forward to working with the FCA and our members to ensure the resulting framework provides clarity and a basis to deliver effective information for investors.”