FCA: don’t delay climate transition

Financial firms and listed companies in the UK should not delay on drawing up plans for transitioning to a net-zero economy before formal rules are finalised, according to regulator the Financial Conduct Authority (FCA).

The FCA has previously mandated asset managers and listed companies to publish, on a comply or explain basis, climate related disclosures since January 2022.

However, there have been widespread discrepancies here, as plans to date based on the disclosures have varied in quality and lack detail on short-term actions to meet net-zero goals, a government-backed review said last month.

The UK’s Transition Plan Taskforce (TPT) is developing mandatory standards for listed companies and financial firms to ensure comparable plans, with the work completed by the end of this year.

Mark Manning, sustainable finance specialist at the FCA, said listed companies and firms regulated by the watchdog should be using the TPT’s draft guidance, currently out to public consultation, to write plans which will get feedback from the regulator. 

“Ultimately we can’t wait for perfection here. Increasingly, a company’s transition plan is financially material information, material to a company’s future prospects,” Manning said.

Plans will help regulators combat greenwashing, or companies making statements on cutting carbon emissions without backing them up, he added.

Once the TPT final guidance is published, the FCA will set out stronger expectations on compliance, Manning said.

The plans are intended to overlap with company sustainability disclosures being implemented in the European Union, the United States and globally by the International Sustainability Standards Board (ISSB) over coming months for use in annual reports for 2024.

Indeed, Patrick Arber, a member of the TPT’s delivery group, said companies should not wait for absolutely perfect guidance on plans to be finalised.