The PRI welcomes the FCA’s efforts to simplify climate disclosure requirements for investment products, but investors must have access to comparable, decision-useful data.
The PRI welcomes the Financial Conduct Authority’s (FCA) efforts to simplify climate disclosure requirements for investment products, based on feedback from the financial industry around the complexity, length, and accessibility of Task Force on Climate-related Financial Disclosures (TCFD) reporting. However, access to comparable, decision-useful data must be maintained. The proposed removal of product-level reporting risks lowering market standards and consistency across climate-related disclosures. Rather than eliminating product-level reporting entirely, the FCA should retain a streamlined regime.
The PRI recommends that the FCA:
- Retain a set of consistent, high-quality decision-useful metrics that provide institutional investors with genuine insights into how firms are managing climate-related risks and opportunities. This includes a set of core mandatory, standardised product-level metrics, including financed emissions, carbon footprint, Weighted Average Carbon Intensity (WACI), portfolio alignment metrics and data quality or coverage metrics.
- Explore opportunities to streamline the format and structure of disclosures to focus on how material climate-related risks and opportunities are managed, consider that climate scenario analysis at the product-level could be better placed under entity-level reporting, and provide guidance on producing data that is machine readable with data tagging.
- Reconsider the proposal to remove the requirement for data to be publicly accessible. Restricting public product-reports could disadvantage smaller institutional investors who rely on readily available public data sets for manager selection, monitoring and engagement. Accessibility is important, and an ‘on demand’ structure with requests for data points no longer captured by the regime in different formats should be avoided. This risks disrupting the flow of information across the investment chain.
- Consider that a balanced combination of standardised metrics and narrative reporting could help enhance contextual understanding, similar to the Sustainability Disclosure Requirements (SDR) regime. Narrative reporting may improve investors’ contextual understanding of climate-related risks and opportunities, which data around scope 1, 2, 3 GHG emissions may not.
- Drive global alignment and mutual recognition of product-level disclosure standards. This helps global investors more easily compare cross-border products and reduces operational compliance costs.
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