The UK’s financial watchdog wants to know if companies seeking an IPO, including oil and gas firms, should be required to disclose their climate risks and transition plans and ensure they align with official net-zero climate scenarios.
The Financial Conduct Authority (FCA) is asking for feedback from stakeholders on reforms to its prospectus rules on what type of information issuers must make available if they want to be publically traded in the UK, according to a consultation paper.
The regulator says it considers the proposed changes as “improving transparency of companies’ climate-related risks and opportunities and supporting investors’ ability to take this information into account in their investment decisions”.
The FCA wants to rewrite the rules so the prospectus would be for IPOs only, in an attempt to cut down on red tape.
The consultation asks for feedback on a series of questions around sustainability-related disclosures, including around climate risk disclosures and transition plans. The proposed rules would require such disclosures if the issuers identify climate-related risks as a risk factor or if climate-related opportunities are material to the company.
The climate-related disclosure requirements would be aligned with categories common to frameworks such as the Taskforce on Climate-Related Financial Disclosures recommendation and International Sustainability Standards Board standards. They would require information such as a description of the actual impact of climate-related risks, how the company identifies and manages such risks, and the metrics and targets used to manage risks.
In addition, the FCA is considering requiring issuers to disclose if any of their debt or bonds have been marked as green, social and sustainable which, if this were to be applied, would require further disclosures.
If issuers have disclosed a transition plan, the FCA would expect it to be included in their prospectus and could be included as a summary. In addition, the regular is asking for feedback on whether transition plans should be considered as “protected forward-looking statements” given their far-sighted nature.
The watchdog is also considering whether or not to require additional climate disclosures for the IPOs of mineral companies involved in mining and fossil fuel projects after the issue was brought up in two submissions from engagement papers.
The submissions included a proposal to change the current criteria for companies with oil, gas and coal projects, as they argued that the current disclosures do not fully address the impact that these projects have on the climate.
The FCA has asked for feedback on calls for issuers to meet an “atmospheric viability” requirement, which means that the company’s consumption needs to be consistent with carbon budgets and aligned with 1.5 C goals and would need to be appraised by a qualified climate expert.
The FCA says that, while it recognises climate can have an impact on a company’s future financial stability, “we would, however, like to understand a wider range of views on these matters to determine whether further action is needed and what may be appropriate”.
Submissions for comment on the proposals are open until 18 October.
This page was last updated August 9, 2024
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
