Takeaways

• The Financial Conduct Authority (FCA) has proposed removing TCFD-based climate reporting for investment products.
• The new framework simplifies disclosures, focusing on retail investor communication and on-demand greenhouse gas data for institutions, with expected £20 million annual savings.
• The move follows a review of 2021 FCA climate disclosure rules, highlighting both improved risk management and concerns over complexity.

The Financial Conduct Authority (FCA), the UK’s financial services regulator, has proposed removing the requirement for investment firms to publish Taskforce on Climate-related Financial Disclosures (TCFD)-based climate reports for investment products. The proposal marks a shift toward a simpler disclosure system aimed at improving clarity for investors while easing compliance pressure on firms. The proposal reflects a wider reassessment of FCA climate disclosure rules introduced in 2021.

Under the updated approach, firms would no longer need to produce detailed product-level TCFD reports. Instead, they would focus on clearer, outcomes-based information on climate-related risks for retail investors, highlighting how such risks may affect returns and financial performance. For institutional clients, firms would still be required to provide greenhouse gas emissions data, covering scopes 1, 2, and 3, but only on request and limited to one request per product each year. The change also affects greenhouse gas emissions disclosure expectations for investment products. It will also reshape asset manager reporting requirements across the sector.

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The FCA estimates that the shift could reduce costs for firms by around £20 million annually. This forms part of the broader sustainable finance regulation UK efforts to streamline reporting frameworks while maintaining investor protection and market transparency.

The review of the 2021 regime found that FCA climate disclosure rules had improved how firms manage climate risk and integrate it into investment decisions. It also strengthened communication between firms and clients on climate exposure and opportunities. However, it also highlighted weaknesses in TCFD-based climate reporting, particularly its complexity and limited engagement among retail investors. Many investors found product-level disclosures too technical, while institutional investors preferred direct engagement with asset managers over public reports. A key aim remains improving climate risk transparency for investors.

Michelle Beck, director of wholesale buy-side at the FCA, said the regulator wants to reduce unnecessary complexity while ensuring investors receive clearer and more useful information. She noted that the new framework is designed to make communication of climate risks more practical and accessible.

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Industry stakeholders are expected to assess how the shift may affect reporting systems, data requests, and alignment with global sustainability disclosure standards. Final rules may adjust reporting expectations based on consultation feedback.

The consultation remains open until July 13, 2026.

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Source: ESGtoday