FCA publishes a Climate Change Adaptation Report

The FCA’s Climate Change Adaptation Report (Report) (October 2021) sets out the FCA’s assessment of how the financial services industry and listed companies are adapting to climate change.

It outlines its own strategic approach to climate-change and expands on its ESG Strategy. The refreshed ESG Strategy aims to help the FCA achieve its 2021/22 Business plan.

The FCA’s ESG Strategy

The ESG Strategy is currently based on three main themes:

• transparency;
• trust; and
• tools.

In the Report the FCA indicates its intention to add the following themes to its strategy

• transition; and
• team.

The Strategy aims to embed climate and other sustainability considerations within every function of the FCA’s organisation.

Other FCA work relating to climate-change referred to in the Report

• Innovation tools:
  such as

  • the digital sandbox pilot focusing on ESG data and disclosures and
  • the Green FinTech Challenge focusing on new products and services to speed the transition to a net zero economy.

• Adapting to climate change and transition to net zero:
  the Report illustrates the main financial risks and harms of adapting to climate change including

  • insurance underwriting risk,
  • credit risk
  • financial market risk, and
  • operational risk.

• Net zero pledges:
  the FCA outlines its intention to work with the industry and stakeholders to see net zero pledges made by asset managers, banks and insurance companies backed up by appropriate governance. The FCA would like to see the adoption of coherent transition plans supported by targets and metrics that allow progress to be monitored.

• Capital Mobilisation:
  the FCA wants to remove any barriers along the investment chain that may inhibit the efficient allocation of funds towards decarbonisation of the economy.

Timeline of upcoming FCA ESG publications

• November 2021
  • The FCA published a discussion paper on Sustainability Disclosure Requirements (SDR) and investment labels.
• December 2021
  • TCFD Policy Statements: we are expecting the publication of final rules for TCFD-aligned disclosures for a wider scope of listed issuers and for asset managers, life insurers and FCA-regulated pension providers.
• H1 2022
  • Feedback Statement on ESG and Capital Markets: The FCA expects to publish its response to the feedback received to its discussion on ESG and Capital Markets in CP21/18.
• H1 2022
  • Net zero stakeholder engagement: the FCA plans to engage with stakeholders on promoting well-designed, well-governed, credible and effective transition plans.
• Spring 2022
  • Feedback Statement and Consultation Paper on Sustainability Disclosure Requirements (SDR) and investment labels: The feedback statement will follow on from the discussion paper published in November. It will include the FCA’s response to the feedback received and consult on the resulting proposals.
• Summer 2022
  • FCA TCFD Report: The FCA will publish its first TCFD-aligned report alongside its Annual Report.