UK climate reporting – FCA consults on changes to climate reporting for investment products

In 2021, the FCA introduced climate disclosure rules for asset managers, life insurers and FCA-regulated pension providers based on the Taskforce on Climate-related Financial Disclosures (“TCFD”) recommendations. The rules require firms to publish annual entity and product-level reports on climate risks and opportunities, carbon metrics and climate scenario analysis (read more here).

Results of the review of TCFD product reporting

Last year, the FCA reviewed how the rules were working and published a summary of what was found. They looked at how retail and institutional investors used the reports.

Retail investors: Firms reported low investor engagement with their TCFD product reports, particularly from retail investors. Research showed that retail investors consider the TCFD product reports too long and complicated to understand. Although, retail investors were still interested in understanding how climate change could impact their investments.

Institutional investors: Institutional investors, such as pension trustees, reported that they need some of the data in TCFD product reports for their own reporting but they typically obtain it by engaging directly with firms rather than via the public reports as this better meets their specific information needs. Institutional investors reported that product-level TCFD reporting was not a useful climate risk management tool as they have their own ways of identifying and monitoring climate risks.

More broadly, firms encouraged the FCA to consider international competitiveness, considering the cost implications for firms and that firms in other jurisdictions are not required to produce these reports.

What is the FCA proposing to replace TCFD product reporting requirements with?

The FCA is proposing to remove the current TCFD product reporting requirements. They will be replaced with a few more targeted and outcome-based rules, while still meeting the intended policy outcomes. This simplification is in line with the FCA’s wider work to streamline rules and reduce complexity for firms following the introduction of the Consumer Duty.

Ensuring that retail investors receive decision-useful information

The proposed rules aim to provide retail investors with information to make informed investment decisions “through greater transparency on financially material climate risks and opportunities”. The FCA is therefore proposing a new rule to be included in the Environmental, Social and Governance (ESG) Sourcebook (ESG 2.3.1BR) requiring firms to:

• consider periodically whether climate risks and/or opportunities could be materially relevant to the financial performance or return of the product; and
• disclose such risks and/or opportunities in communications that are intended for retail clients and that provide general information on risk and financial returns.

The scope of the new rules is set out in ESG 2.3.1AR but remains unchanged from the previous scope for public TCFD reporting.

What do firms need to do to comply?

The FCA is not expecting firms to implement new systems or carry out exceptional process as it understands that firms already have well-established processes in place to manage and monitor financial risks. The ESG 2.3.1CG(1) clarifies that a firm’s obligations under ESG 2.3.1BR may be met as part of a firm’s usual risk assessment procedures.

For those products also in scope for compliance with the FCA’s Consumer Composite Investment (CCI) regime (finalised in December 2025), firms can disclose information they have determined to be materially relevant climate risks and/or opportunities as part of the risk and return information within a product summary (there is no requirement for every product to include climate information within the product summary if not material). All disclosure should be in line with a firm’s obligations under the consumer understanding outcome of the Consumer Duty.

The FCA has not prescribed when the information should be disclosed or where as not all products will have product summaries and information may be disclosed in other materials to retail investors.

What information needs to be shared with institutional clients?

The FCA recognises that institutional investors are subject to their own climate reporting obligations and, in the absence of annual product TCFD reporting, the FCA wants to ensure that there is a regulatory basis for institutional investors to obtain information.

The FCA is therefore proposing to adapt the ESG Sourcebook so that:

• firms are required to provide, at a minimum, data on scope 1, 2 and 3 greenhouse gas (“GHG”) emissions when requested by clients that require such information to satisfy legal or regulatory disclosure obligations; and
• investors are only eligible to request this information once per calendar year, per product.

The proposed rules provide for institutional investors to request additional climate metrics which are reasonably required to satisfy their own climate-related disclosure obligations. Firms should provide this further information where reasonably practicable and permitted contractually. But firms are not permitted to disclose information where there are gaps in the underlying data or methodological challenges which would result in the information being misleading.

The proposed rules do not change the products proposed to be in scope of this requirement because institutional clients need information across a range of products and will no longer have access to this information from public TCFD product reports.

In order to implement these changes a number of consequential amendments will be made to the ESG Sourcebook and the Collective Investment Schemes (COLL) Sourcebook to remove reference to TCFD product reporting requirements.

What next?

The consultation closes on 13 July 2026. The FCA aims to finalise and implement the rule later in 2026.

The FCA states that the “proposals complement the FCA’s Sustainability Disclosure Requirements for asset managers, which aim to help retail investors navigate the market for sustainable investment products and reduce greenwashing”.

This review is just the beginning of the story. We can expect the FCA to propose further amendments to its rules for entity-level disclosure in further publications.

Our global Sustainable Finance & Investment group brings together a multidisciplinary global team that provides clients with best-in-market support. We are following developments relating to ESG regulation, so please get in touch if you would like to discuss.

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This note is intended to be a general guide to the latest ESG developments. It does not constitute legal advice.

Authored by Emily Julier and Rita Hunter.