Listed firms set to face more stringent climate disclosure rules

Britain’s top listed companies must disclose how their businesses will be affected by climate change or explain why they have not, under plans unveiled by the City watchdog.

The Financial Conduct Authority (FCA) said the proposed new rule would apply to premium listed stocks and would see disclosures made in line with the approach set out by the Taskforce on Climate-related Financial Disclosures (TCFD).

The regulator said it is also considering extending the rule to a wider range of listed companies and regulated firms.

Andrew Bailey, chief executive of the FCA and incoming Governor of the Bank of England, said: “Climate change presents a serious and wide-ranging threat to global economic prospects, society more broadly, and our natural environment.

“The changes we propose will help to provide the transparency the market needs to be able to assess how well companies are adjusting to the risks of climate change.”

He added: “Improved disclosures will support better asset pricing and enable investors to make more informed choices about where to allocate their capital – which will ultimately support the transition to a low-carbon economy.”

The FCA said it plans to allow firms to explain why they cannot disclose, given the evolving nature of standards for disclosure and understanding of the financial impacts of climate change.

The Climate Financial Risk Forum, launched jointly by the FCA and the Bank’s Prudential Regulation Authority last year, will also soon be publishing industry guidance, covering climate-related disclosures.

There are 480 premium listed companies on the London Stock Exchange, which have a combined market capitalisation of £2.3 trillion.

The Investment Association welcomed the FCA’s plans.

Andrew Ninian, director of stewardship and corporate governance at the Investment Association, said: “Our industry is looking to the UK’s largest listed companies to demonstrate that climate change is being taken seriously in boardrooms and to start reporting on these risks now.

“Climate change could result in a significant loss of value in companies if risks are not effectively measured and managed, ultimately hitting savers’ pockets.”