Climate risk disclosure and encouraging green finance form important functions in aligning financial flows with achieving Paris climate goals and the public interest. They are also vital to help avoid a disorderly transition and systemic risks linked to climate change, as pointed out by the Bank of England.
As long-term investors we support the FCA’s focus on climate risk reporting. We also strongly support the FCA’s effort to clarify how existing disclosure obligations would capture the reporting implications of climate change. Too often the starting point for discussions on climate-related disclosures is that they are voluntary. In our view material climate risks should be treated like any other risk, and thus should be captured in statutory company reporting to shareholders in both narrative and accounting disclosures.
We would welcome the FCA, alongside the reconstituted Financial Reporting Council (FRC), confirming the existing requirements for transparent reporting of climate-related risks and providing supportive guidance for how companies should meet their obligations to ensure full disclosure and to support comparability.
The FCA published a report on Climate Change and Green Finance in October 2018. They invited comments in response, and we made a submission to the FCA in concert with the Local Authority Pension Fund Forum (LAPFF).
This submission incorporates several strands of our prior climate risk reporting and accounting representations.