In December 2021, the FCA published its final requirements for a climate-related financial disclosure regime for asset managers (as well as life insurers and FCA-regulated pension providers).
As expected, the FCA’s new rules follow the Recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
The FCA’s Policy Statement (PS21/24) and the new FCA ESG sourcebook sets out the recommended disclosures.
The asset managers in scope cover investment portfolio managers, UK UCITS, management companies, full-scope UK AIFMs and small authorised UK AIFMs.
There is an exemption for asset managers with AUM less than £5bn.
The Product scope includes authorised funds, unauthorised AIFs and portfolio management services.
The rules first apply to the largest asset managers from 1 January 2022. The application is deferred until 1 January 2023 for asset managers with assets under management less than £50 billion.
The Disclosures include disclosures both at entity (authorised fund manager level) and product/fund level.
These disclosures will need to be published on the company website and other appropriate client communications. The Disclosure Requirements (SDR) which are expected to be published in 2023.
Product Disclosures
Product Disclosures will include an annual set of climate-related disclosures to be published by 30 June each year. These must be published in a prominent place on the firm’s website and included or cross-referenced in appropriate client communications.
There is also a requirement for data to be provided in a reasonable format, considering the needs of clients. This is likely to result in the development of a standardised template, along the lines of the EMT.
The contents include:
The FCA’s proposal is for 5 categorisations of Products:
These, and how they may be expected to overlap wit SFDR classifications are summarised below:
| SFDR Classification | |||
|---|---|---|---|
| Not promoted as sustainable | Funds which are not promoted as sustainable | Article 6 | |
| Funds which might be classified as "responsible" | May have some sustainable investments | Article 8 | |
| Sustainable funds | Transitioning | Products with sustainable characteristics, themes or objectives; low allocation to taxonomy – aligned sustainable activities | Article 8 |
| Aligned | Products with sustainable characteristics, themes or objectives; high allocation to taxonomy – aligned sustainable activities | Article 9 | |
| Impact | Projects objective of delivering positive environmental or social impact. | Article 9 |
The differentiator between aligned and transitioning would be the proportion of assets considered sustainable.