17 December, UK. FCA’s new rules on climate-related disclosures to help investors, clients and consumers
The Financial Conduct Authority (FCA) has published two Policy Statements confirming final rules and guidance to promote better climate-related financial disclosures. The regulator states that better corporate disclosures will help inform market pricing and support business, risk and capital allocation decisions. Improved disclosures to clients and consumers will also help them make more informed financial decisions. This, in turn, will strengthen competition in the interests of consumers, protecting them from buying unsuitable products and driving investment towards greener projects and activities.
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 Taskforce on Climate-related Financial Disclosures (TCFD). If they don’t, they’ll need to explain why. 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’ll also have to make disclosures about the climate-related attributes of their products. Read more.
1 January, EU. The European Commission released, for internal consultation, the additional and long-awaited delegated act
The Delegated Act (DA) includes economic activities associated with natural gas and nuclear energy, as environmentally sustainable transition activities under the EU taxonomy. The development has raised acute division among market participants and public bodies as to whether it is a good development or not. Initially the Commission provided a deadline for internal consultation (with Member States and the EU Platform on Sustainable Finance) of Jan 12, but it has been extended to Jan 21. Despite the slight extension, it is unlikely that the direction of travel of the Commission will change. The topics of nuclear and gas have long ago become extremely political – which was further exacerbated by the decision to allocate public funds, such as COVID-19 pandemic recovery funds, to EU Member States based on their green credentials amongst other factors.
Notably, the draft DA introduces additional disclosure requirements to ensure that investors can make an informed decision on whether they want to invest in such green activities. Companies that carry out, fund, or have exposures to nuclear energy and gas-related activities will have to provide information on the proportion of these activities via a dedicated template. The draft DA therefore proposes amendments to the Taxonomy related disclosures (Article 8) to take effect from 1 January 2023, and also states that the Commission will propose to amend the Sustainable Finance Disclosure Regulation’s (SFDR) disclosure requirements. Realistically, private investors who have already been applying exclusion policies for fossil fuel/nuclear related activities are likely to continue to do so, therefore it is not yet clear to what extent the inclusion of nuclear and gas in the EU taxonomy will have an impact on future private capital allocation to sustainable projects.