Feeling the heat? The latest on climate reporting from the FCA

The Financial Conduct Authority has released its report on its multi-entity review of climate-related disclosures by asset managers, life insurers, and FCA-regulated pension providers. The review assesses how well firms are aligning with the Task Force on Climate-related Financial Disclosures (TCFD) rules, considering what has and has not worked to date.  

Broadly, the FCA’s review suggests that TCFD-aligned climate reporting is working as intended. Firms are increasingly treating climate risk as material in decision-making, building internal capabilities, and becoming more transparent with clients. This is a positive shift that reflects growing awareness of climate-related financial risks and opportunities. 

Progress, but not perfection. 

However, the review also highlights that organisational sustainability reporting is never perfect, with several persistent issues that echo those seen across many other ESG platforms. The biggest challenge is data granularity and alignment. Firms are struggling to collate information in a way that is streamlined against not just TCFD requirements, but other sustainability frameworks in parallel. Specifically, forward-looking disclosures were shown to remain a challenge, with many of the reports reviewed not covering all three of the required climate scenarios.  

Secondly, firms are finding that the information they’re being required to disclose is too complex for many retail investors. This means that they’re not able to effectively communicate their climate-related disclosures and are subsequently receiving limited responses to their reports, particularly at the product level. Adding to a lack of engagement from retail investors is the finding that product level reports were difficult to find on firm’s websites, often not easily accessible from the homepage. This provides a useful reminder to firms to ensure that steps taken to increase transparency of sustainability data are not hindered by a lack of accessibility.   

Finally, as with the majority of feedback on various ESG disclosure frameworks, the challenge of balancing reporting burdens with meaningful disclosures emerged from the findings. Of the firms engaged, asset managers in particular noted that they are required to report under multiple sustainability regimes and suggested that the TCFD rules could be simplified. Currently, the proliferation of such regimes creates inefficiencies for firms that are trying to navigate overlapping requirements with limited clarity on how to prioritise information requests. This runs the risk of causing confusion and reducing the meaningfulness of sustainability data that is presented. 

FCA backs international standards. 

The FCA’s next steps shows advocacy for international alignment in sustainability reporting requirements. Their endorsement of the International Sustainability Standards Board (ISSB) approach reflects a broader movement toward consistent, comparable, and reliable disclosures across jurisdictions. Such a shift would also present a more streamlined process that organisations have been asking for.  

By taking this more proportional approach in balancing reporting burden with meaningful disclosures, there is an opportunity for both businesses and consumers alike. Firms that align early with ISSB principles will be better positioned to operate across borders, attract global capital, and respond to investor demands for clarity and accountability. Meanwhile, consumers will be provided with decision-useful information that can be used to guide more value-aligned investments. To do this, the FCA are looking to engage industry further. You can find out how to give your feedback here. 

Streamlining disclosures brings benefits to businesses and consumers alike. 

Advocacy for the ISSB signals an opportunity to align reporting not just in the UK, but as part of a global movement to streamline rules and standards to reduce complexity for those reporting and receiving information. At Avyse, we can help you to prepare by mapping your current disclosures to ISSB frameworks, alongside other regulatory disclosures. By identifying gaps and opportunities for improvement, we can help you maximise impact while reducing reporting burden. We also work with firms to translate technical reports into digestible, user-friendly formats, enhancing transparency and trust. Reach out to us today to find out more!