Regulators in the UK and Japan are exploring ways of embedding climate-related reporting rules into their respective requirements for listed companies.
The Financial Conduct Authority (FCA) in London has this week announced proposals for companies listed on UK markets and “certain regulated firms” that would require them to report on their impacts on climate change in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The UK regulator previously consulted on similar rules for the country’s “most prominent” listed companies in December 2020, and now wants to expand the requirements to include all publicly traded corporates.
Sheldon Mills, executive director of consumer and competition at the FCA, said: “The climate change challenge affects the whole of society. It is vital that the financial services sector plays a leading role in addressing this challenge.
“Managing the risks of climate change and transitioning to a cleaner and less carbon-intensive economy will require high quality information on how climate-related risks and opportunities are being managed throughout the investment chain.
“However, climate-related disclosures do not yet meet investors’ and market participants’ needs. The new rules will help markets, investors and ultimately consumers better understand the impact of climate change and make more informed decisions.”
The new rules would also apply reporting requirements to asset managers, life insurers, and regulated pension providers.
Meanwhile, in Japan, the Financial Services Agency (FSA) is considering similar rules also based on the TCFD’s recommendations. A report from the regulator’s Expert Panel on Sustainable Finance has recommended that it works with the International Financial Reporting Standards Foundation to develop sustainability reporting standards.
The panel also said the FSA should introduce a formal code of practice for the providers of sustainability data and develop an information-sharing platform for this data.
The developments come as the Securities and Exchange Commission is consulting on how to incorporate environmental, social and governance factors into its rulebook for listed companies.
President Joe Biden signed an executive order on May 25 instructing Us regulators to develop climate risk strategies and reverse anti-sustainability measures brought in by the previous administration.