The U.K. pension regulator is releasing new rules on climate disclosures for institutional investors and defined benefit pension plans.
In a report, the Financial Conduct Authority laid out its latest rules and guidelines for pension plan sponsors related to climate-related risks and opportunities. “Firms would be required to produce, annually, a baseline set of consistent, comparable disclosures in respect of their products and portfolios, including a core set of metrics.”
The new rules would require pension plan sponsors to publish two types of annual disclosures. The first — entity-level disclosures — would require them to disclose how climate-related risks and opportunities are taken into account in managing or administering investments across all portfolios. The second — portfolio disclosures — would provide a baseline set of consistent, comparable disclosures in respect to assets held within individual portfolios.
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The rules were developed after a consultation period between pension plan administrators, institutional asset managers and the regulator’s task force on climate-related disclosures. The regulator noted it aims to increase transparency on climate-related risks and opportunities, including recommending that organizations place both types of disclosures in prominent positions on their websites.
In the report, the FCA indicated the disclosures would provide pension plan members, clients of asset managers and other stakeholders with a more transparent perspective on the investment sector’s approach to environmental issues, while acknowledging it would take time before the benefits of the new rules are fully realized.
“Our aim is to increase transparency on climate-related risks and opportunities and enable clients and consumers to make considered choices. We recognize, however, that there will be data and methodological challenges for a transitional period. In finalizing our position, we have sought to find a balanced and proportionate approach that continues to mobilize the industry forward on climate-related disclosures and encourages the necessary investment in capabilities, while at the same time ensuring that disclosures remain fair, clear and not misleading.”
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