The UK’s Financial Conduct Authority (FCA) is planning to simplify sustainability reporting rules for asset managers, life insurers, and pension providers. This follows a review of the climate-related disclosure requirements introduced in 2021, which were based on the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).

The review found that the rules have successfully encouraged firms to assess climate risks more thoroughly, integrate them into strategic decisions, and improve transparency with clients. However, it also revealed several challenges. Many firms said that while detailed climate reports are valuable for institutional investors, they tend to be too complex for retail investors and therefore reduce engagement.

Asset managers highlighted that having to comply with multiple sustainability reporting regimes has created significant administrative burdens. The TCFD’s granular requirements were also seen as overly detailed, making reporting time-consuming. Data gaps, especially in forward-looking analysis such as climate scenario planning, were another issue, which often reduces the comparability of reports. The FCA also noted that while entity-level disclosures were generally easy to find, product-level reports were harder to locate, further limiting their usefulness for retail clients.

In response, the FCA is exploring measures to streamline the framework. Priorities include reducing complexity, easing the compliance burden on firms, and improving the decision-usefulness of disclosures for clients. The regulator also aims to align UK requirements more closely with global standards, particularly those from the International Sustainability Standards Board (ISSB) and the Sustainability Disclosure Requirements (SDR) framework.

To support this, the FCA has updated its SDR guidance to help firms streamline their processes, such as aligning reporting timelines between TCFD and SDR requirements. The regulator also plans to work closely with the UK government and international bodies to promote consistent, globally aligned sustainability disclosure standards.

By simplifying the framework, the FCA hopes to make sustainability reporting more effective for investors while ensuring firms can meet requirements without unnecessary complexity.

Source:

https://www.esgtoday.com/fca-looks-to-simplify-sustainability-reporting-requirements-for-asset-managers-insurers/