The U.K. Financial Conduct Authority has published a feedback statement on its proposals for improving climate change disclosures and the information given to consumers about green financial products and services. The feedback statement follows the FCA’s discussion paper on climate change and green finance, in which it sought comments on potential changes to its regulatory approach in these areas.
Climate change is expected to have a significant effect on the U.K. economy and financial services markets, and the FCA is looking to use its regulatory role to ensure market participants are able to manage risks associated with these changes. The feedback statement provides a summary of the responses received to the FCA’s discussion paper. Respondents noted that determining the materiality of climate change risks was difficult and further guidance for issuers and regulated firms on issuing high quality and consistent climate-related disclosures would be welcome. Respondents were also supportive of internationally agreed standards and metrics for defining the sustainability characteristics of financial products. Respondents did have concerns about barriers to the growth of the green finance market, including a focus on short-term results in the financial sector and “greenwashing” (products misleadingly marketed as having an environmentally positive impact), and felt that ongoing industry engagement was positive and should continue.
The feedback statement also sets out the FCA’s intended next steps, which are:
- To issue a consultation paper in early 2020 on issuers’ climate change disclosures;
- To publish a feedback statement in the coming weeks on the FCA’s recent joint discussion paper on stewardship, finalize proposed rules for Independent Governance Committees by the end of 2019 and finalize proposed rules to facilitate investment in patient capital opportunities in due course;
- To set expectations around green financial products by challenging greenwashing and conducting further analysis on the issue; and
- To continue to collaborate with the U.K. government and other bodies on initiatives designed to tackle climate change risks to the financial sector.