In brief
The Financial Conduct Authority (FCA) has said following its recent multi-firm review of how its climate disclosure rules have been operating that it will look to “streamline and enhance” its sustainability reporting framework and has pledged to “simplify disclosure requirements”. This is welcome news for the industry and seems to be driven by feedback from the asset management sector that Task Force on Climate-related Financial Disclosures (TCFD) reporting rules are overly granular. There also seems to be a move towards consolidation across UK sustainability reporting frameworks as the FCA will consider the Sustainability Disclosure Requirements (SDR), International Sustainability Standards Board (ISSB) and transition planning going forward.
In more detail
The FCA is aiming to streamline its sustainability reporting framework following its multi-firm review of how its climate disclosure rules have been working for asset managers, life insurers and FCA-regulated pension providers thus far.
The FCA released its findings on 6 August 2025. Key points arising from the review are as follows:
- The headline outcome of the review is that the FCA is intending to “streamline and enhance” its sustainability reporting framework, and has pledged to “simplify disclosure requirements”, which is good news for the industry. This partly seems to be driven by feedback from the asset management sector that TCFDÂ reporting rules are overly granular, and that there is currently complexity arising from multiple sustainability disclosure regimes in the UK.
- There also seems to be a move to consolidate reporting across UK sustainability reporting frameworks, or at least to consider it in the round, with the FCA noting that it “will consider sustainability reporting as a whole” going forwards, including the SDR, ISSB, and transitioning planning.
- Other practical points to note are as follows:
- There is no indication of an extension in the scope of TCFD reporting to a wider range of firms at this stage;
- Firms should remain on top of ISSB reforms where applicable (noting that the UK government is currently consulting on proposed amendments in order to finalise UK SRS S1 and UK SRS S2);
- The UK asset management sector still appears to be finding its way with respect to scenario analysis and quantifying the potential impact of climate risk on the future valuation of portfolio assets. The FCA noted that only around half of the product reports it reviewed disclosed the impact of all three climate scenarios on the relevant fund, as required, which limited comparability between reports; and
- The FCA notes concerns around ease of access to data, with product reports being challenging to locate. This goes over similar ground to the FCA’s comments in its 2023 review into the design, delivery and disclosure of ESG and sustainable investment funds, where the FCA observed that cross-references appearing in disclosure documents were often unclear, with cross-referenced information not linked together in a clear and coherent way. At that time, the FCA cautioned that key information was not where the regulator would have expected it to be, and in some cases it was necessary to cross-refer between several documents to find it. With this in mind, managers in the ESG space should continue to stay on top the way they present and make accessible ESG data.
Background
- The FCA finalised its climate disclosure rules in 2021, which require asset managers and other FCA-regulated asset owners to make mandatory disclosures consistent with recommendations from the TCFD.
- The disclosure requirements comprise an entity-level TCFD report in which firms set out how they consider climate-related risks when managing or administering investments and a product or portfolio level report, which comprises a set of comparable disclosures in relation to products and portfolios including a core set of metrics.
- The TCFD reporting requirements came into effect on 1 January 2022 for asset managers with assets under management in excess of GBPÂ 50 billion, with the deadline for first public disclosures occurring on 30 June 2023. For smaller asset managers with assets in excess of GBPÂ 50 billion, the reporting requirements came into effect on 1 January 2023.
- TCFD reporting requirements apply not only to UK Alternative Investment Fund Managers (AIFMs) and Undertakings for Collective Investment in Transferable Securities (UCITS) Management Companies (ManCos), but also to portfolio management firms (with life insurers and pension providers being subject to a similar set of rules).
- The FCA carried out its review of 10 TCFD entity reports and 77 TCFD product reports from eight firms. It also liaised with trade associations and seven firms in-scope of the TCFD rules.
Findings
The FCA had the following findings:
| Findings | Details |
| Risk management | The FCA was broadly positive about its impact on risk management, noting that firms found that the rules had helped them consider climate change as a material risk, build their capabilities and integrate climate risks and opportunities into their strategies |
| Audience | Firms noted that while detailed climate disclosure was useful for institutional investors, this was less of the case for retail investors who found it too overwhelming; many firms reported limited engagement from retail investors with their TCFD reports, especially at a product level |
| Accessibility | Unlike entity reports, which were accessible through firms’ main webpage, product reports were often difficult to find, which the FCA noted may have contributed to the limited response from retail investors |
| Data | While firms were able to report on backward-looking data, for example carbon emissions, forward-looking disclosures such as scenario analysis were more challenging because of the lack of quantitative data, and the FCA also noted that only around half of the product reports it reviewed disclosed the impact of all three climate scenarios on the fund, as required, which limited comparability between reports |
| Proportionality | Asset management firms in particular found the TCFD requirements too granular and suggested that sustainability disclosures could be streamlined |
| Regulatory clarity | Firms sought clarity about the future of the FCA’s TCFD rules and emphasised the importance of alignment with international rules |
Next steps
- Whilst the outcome of the review is that the FCA is intending to “streamline and enhance” its sustainability reporting framework, there is as yet limited information on how this will be achieved.
- However, the FCA has to date updated its sustainability reporting requirements webpage to provide more guidance to firms that need to adhere both to its TCFD and Sustainability Disclosure Requirements rules.
- As part of its efforts to streamline its sustainability reporting framework, the FCA said it would engage further with industry on its next steps.
- The FCA also singled out the need to promote international alignment. While the UK became the first G20 country to make TCFD reporting compulsory in 2022, the TCFD has since been disbanded with the ISSB taking over its responsibilities.
- In June, the UK government launched a consultation on implementing sustainability reporting standards based on those of the ISSB. The consultation closes in September.
Thomas Blott, Trainee Solicitor, has contributed to this legal update.
