The Financial Conduct Authority (FCA) has announced that it wants to make its climate-disclosure rules more flexible than originally planned.
The UK regulator has digested all the feedback it received from a recent public consultation on its approach to adopting the International Sustainability Standards Board’s (ISSB) framework.
A national regime, known as the Sustainability Reporting Standards (SRS), was originally expected to impose ‘comply-or-explain’ requirements on listed companies, meaning they could disclose ISSB indicators, or explain the reason why they had decided not to.
For climate metrics, however, the FCA had proposed to make reporting mandatory.
That decision was made because climate risks are recognised widely as being financially material, and emissions data is relatively mature and readily available, which is not the case for many other sustainability topics.
But during its feedback window, the FCA received pressure from some firms to take a more flexible approach across all areas, and Jon Relleen, director of infrastructure and exchanges at the regulator, said it had settled on “a proportionate approach to implementation” which balanced investors’ need for information with the UK’s attractiveness to large companies.
All metrics are now set to be comply-or-explain.
“The FCA’s alignment with international standards is welcome, but comply-or-explain risks leaving stakeholders, including investors safeguarding more than £3trn of UK pension savings, without complete, reliable and comparable data if some complacent boards choose not to comply,” said Luke Hildyard, head of UK policy at ShareAction.
He added: “Reporting on social and environmental impact should be foundational to all corporate disclosure.”
LAPFF pushes calls for votes on transition plans
Meanwhile, the UK’s Local Authority Pension Fund Forum (LAPFF) has announced a collaboration with other institutional investors, including asset manager CCLA, to push for shareholders to have more say over portfolio companies’ climate transition plans.
More than 60 investors have written to the chairs of FTSE100 companies asking them to put their climate plans to an advisory vote at least every three years.
Just 13 FTSE 100 firms have allowed such a vote in the past three years, according to a statement by the group.
“The initiative aims to improve transparency, shareholder accountability, and promote constructive dialogue, giving boards a clear understanding of investor support for their company’s transition strategy. Meanwhile, disclosure of a robust transition plan helps demonstrate how climate-related risks and opportunities are being integrated into business strategy and capital allocation,” stated LAPFF and CCLA.
The group pointed to the FCA’s original proposals for the UK SRS. “If adopted, companies would also have to say whether they have a transition plan in place or explain why not.”
