On 16 October 2019, the FCA published its Feedback Statement on Climate Change and Green Finance. The paper summarises the key themes arising from feedback to the FCA’s Discussion Paper (18/8) as well as the FCA’s responses and intended next steps.


The role that the financial sector can play in supporting the transition to a greener economy has been highlighted by increasing awareness and understanding of the impacts of climate change. This has contributed to a growing demand from consumers for: green finance products and services; and for large corporates to take their social responsibilities seriously. There is an increasing range of green finance products available to consumers including green loans for small businesses; green bonds (the H1 2019 issuance of which, on a global scale, surpassed H1 2018 issuance by 48%); and green mortgages which offer lower rates to homeowners who want to buy energy-efficient properties.

Unsurprisingly, there is a growing public policy focus on green finance both in the UK and globally, with the financial sector’s response to climate change being echoed as a point of focus for both Mark Carney from a UK-perspective and Christine Lagarde in her recently confirmed forthcoming role as the new head of the ECB. The Feedback Statement is part of a wider set of communications from the UK financial regulators and others seeking to direct the evolving conversation around climate change and green finance. There is also overlap with the broader questions being raised around the redefining of the purpose of financial institutions and the role of regulated firms in wider society.

The FCA’s target outcomes:

The Feedback Statement focuses on three priority outcomes which are being targeted by the FCA: disclosures to the market; integration of consideration of climate risks; and consumer access to green finance products and services.

i. Issuer Disclosures: readily available, reliable and consistent information on issuers’ exposure to material climate change risks and opportunities

  • In early 2020, the FCA will launch a consultation on new proposed rules regarding climate-related disclosures to encourage consistent, proportionate and transparent disclosure of climate-related risks. The indication is that the consultation will clarify existing obligations in relation to climate-related disclosures, while the new rules will be proposed:
    • on a comply or explain basis;
    • to align with the Taskforce for Climate-related Financial Disclosure (TCFD’s) recommendations;
    • as the foundation for considering further rules in respect of issuer disclosures on other sustainability factors and future climate-related disclosures from regulated firms more generally;
    • to provide clarity on what is expected which will assist in the growth of service providers by fostering innovation, increasing competition and helping to ensure the UK remains an attractive location for listings.
  • The consultation appears to be responding to feedback from the industry that any rule changes should be proportionate: aligning with the existing TCFD recommendations and without an automatic sanction for non-compliance. At an EU level, the European Commission recently published new guidelines on climate-related information in non-financial corporate reporting, as part of its Sustainable Finance Action Plan (SFAP), incorporating the TCFD recommendations. The guidelines provide companies with practical recommendations on how better to report the impact that their activities are having on the climate as well as the impact of climate change on their business.
  • In addition, further disclosure obligations are being proposed under the SFAP which would apply to asset owners and asset managers, which could have an indirect impact on the sort of disclosures issuers (as investee companies) would need to provide to their investors.
  • Directors are also required to consider the impact that the activities of their company are having on their wider community, environment and stakeholders (pursuant to section 172 of the Companies Act 2006) and produce a statement setting out how they have had regard to these factors. Any climate-related rules imposed by the FCA will sit alongside these existing requirements.

ii. Integrate climate change considerations: integration of climate change risks and opportunities into regulated firms’ business, risk and investment decisions

  • Over the coming weeks, the FCA will issue a further feedback statement on effective stewardship by asset managers and asset owners aimed at creating a supportive environment in which progress towards effective stewardship across the industry can accelerate.
  • The FCA intends to publish a Policy Statement and new rules this year requiring consideration and reporting of ESG policies in the context of workplace personal pension schemes.
  • Green finance and climate change are being considered as part of the relevant package of considerations in the FCA’s ongoing work on patient capital and long-term investment. A feedback statement on this topic will also be forthcoming.
  • The FCA is also considering the role a firm’s culture, governance and leadership can play in managing the risks of climate change. Companies should consider how this aligns with conversations which are happening more broadly in terms of company purpose, sustainable development goals and having regard for broader stakeholder interests.

iii. Consumer Access: availability of green finance products and services for consumers, with appropriate information and advice regarding investment decisions

  • Sustainable product offerings remain an “active area of focus” for the FCA in particular in order to gauge whether there is evidence of potential “greenwashing”.
  • The FCA is considering whether further guidance in relation to governance, design and delivery of such products is necessary.
  • The statement discusses concerns around “greenwashing” and mis-selling of sustainable product offerings. The FCA “will challenge firms where [it] see[s] potential greenwashing and take appropriate action to prevent consumers being misled”.
  • As the taxonomy and methods of determining net sustainability impacts of financial products are developed, it is clear that the FCA is alive to the risks associated with sustainable labelling.

One of the key themes of the statement is ongoing collaboration with government, other regulatory bodies and industry. The FCA continues to monitor and contribute to initiatives at a European level such as the SFAP, work on a consistent taxonomy, and considering additional duties in relation to investment advice having regard to customers’ ESG preferences. In its Green Finance Strategy, the UK government set out its commitment to at least matching the ambition of the objectives of the SFAP in relation to green finance irrespective of the outcome of Brexit. The UK regulator’s contribution is presented as part of a wider picture, and the next steps proposed are presented as the foundation for further change and development in this space.

Next Steps: