The Financial Conduct Authority (FCA), the UK’s conduct regulator for financial services firms and financial markets, announced a new proposal to drop requirements for financial firms to publish TCFD-based climate disclosures for investment products, replacing them with simplified reporting on climate risks for retail investors, and on-demand emissions data for institutional clients.

The new proposals form part of the FCA’s efforts to streamline sustainability reporting requirements for asset managers and asset owners. The regulator estimated that the new rules would save investment firms approximately £20 million ($USD27 million) per year.

The new proposal follows a review carried out by the FCA of the results of climate reporting rules put in place by the regulator in 2021, which required asset managers, life insurers and FCA-regulated pension providers to disclose climate-related information in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. Under the current rules, firms are required to annually publish entity-level reports, setting out how the firm takes climate risks and opportunities into account when managing or administering investments, and product-level reports including carbon metrics and climate scenario analysis.

The review found several positive impacts from the implementation of its climate reporting rules, particularly in the area of risk management, with firms indicating that the requirements have helped them to consider climate change as a material risk and to build their capabilities, as well as to help them to integrate climate risks and opportunities into their strategies. The review also found that the rules have also improved transparency with clients on how firms take climate risks into account when managing or administering their assets.

The review also found, however, that while retail investors remain interested in the impact of climate risks on their investments, the level of detail required under the TCFD recommendations was too complex, resulting in low engagement with the TCFD-based product reports. For institutional investors, the review indicated that they need some data within the TCFD-based product reports, they typically engage directly with the firms to meet their specific data needs, rather than referencing the public reports.

Under the new proposal, the FCA would remove TCFD product reporting requirements, introducing in their place more targeted, and more outcomes-based rules. For retail investors, firms would be required to periodically consider whether climate risks and opportunities could be materially relevant to the financial performance or return of the product, and to disclose these in communications that provide general information on risk and financial returns.

For institutional clients, the FCA’s new proposal would require firms to provide data on scope 1, 2 and 3 greenhouse gas (GHG) emissions, at a minimum, when requested by clients to satisfy their climate disclosure obligations, with a limit of one request per product per year.

Michelle Beck, director of wholesale buy-side at the FCA, said:

“As part of being a smarter, more proportionate regulator, we’re cutting complexity in our rules for asset managers, while keeping the focus on clear, useful information for investors. These proposals will make it easier for firms to communicate with their customers in ways that genuinely inform and engage them.”

The FCA said that it has opened a consultation on the new proposals, which will remain open until July 13, 2026.

Click here to access the consultation and new proposed rules.