The FCA is proposing to replace its detailed TCFD-based product disclosures with a more flexible, outcomes-focused approach.
By Nicola Higgs, Anne Mainwaring, and Charlotte Collins
On 5 June 2025, the FCA published its latest Quarterly Consultation Paper. Amongst other topics, the FCA is consulting on removing its product-level climate-related disclosure rules for asset managers, life insurers, and FCA-regulated pension providers. These rules were introduced in 2021, and are based on the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. The FCA intends to replace them with more outcomes-based rules, giving firms greater flexibility as to how they communicate climate-related information to investors.
Background
Following a 2025 review into how the TCFD-based disclosures were functioning in the market, the FCA concluded that many firms considered the disclosures too complex for retail investors and found the rules too granular and burdensome. In particular, they highlighted the challenges of being required to report under both the TCFD rules and the separate FCA Sustainability Disclosure Requirements regime. Therefore, the FCA announced in August 2025 that it was considering how to simplify and streamline its TCFD-based reporting framework to ease unnecessary burdens on firms, improve the usefulness of reporting, and promote international alignment.
Key Proposals
The FCA is proposing to introduce a new rule for retail disclosures, 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 FCA emphasises that firms would not be expected to disclose climate-related information for every product under this rule, clarifying that the rule is intended to apply proportionately. The same products would be in scope as under the current TCFD-based rule. Firms making disclosures under this requirement would need to consider their obligations under the Consumer Duty, particularly the consumer understanding objective. Firms would therefore have the flexibility to make disclosures in a way they think most likely to promote sound understanding. However, firms would also need to make more independent judgements as to what constitutes adequate disclosure.
In order to emphasise that it does not necessarily expect firms to implement new systems or processes to meet this requirement, the FCA highlights that firms may fulfil their obligations as part of their usual risk assessment procedures. Further, the FCA explains that, if a product also falls within scope of the Consumer Composite Investments (CCI) regime, the firm may disclose materially relevant climate risks and/or opportunities as part of the risk and return information within the CCI product summary. Consequently, firms would not be expected to double up on disclosures.
In relation to institutional clients, the FCA is proposing to adapt current rules to state 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 their own climate disclosure obligations; and
- clients are only eligible to request this information once per calendar year, per product.
Once again, the FCA is proposing to maintain the same product scope as under the current rules. The regulator is aiming to reduce the data required to be disclosed so that this only includes GHG emissions, in order to reduce the burden on firms. However, it will include guidance that encourages firms to provide other metrics if reasonably required by the client for their own climate reporting. The FCA also intends to maintain guidance specifying that firms should not disclose information to clients where there are data gaps or methodological challenges that cannot be addressed through the use of proxies or assumptions without the resulting information being misleading.
Therefore, overall, the FCA is seeking to significantly reduce the reporting burden for firms. The regulator’s cost-benefit analysis for the proposals suggests it expects these changes to result in cost savings for the industry of around £20 million per year.
Next Steps
The consultation is open until 13 July 2026, and the FCA plans to publish final rules in autumn 2026. The FCA notes that it is continuing work on how to streamline sustainability reporting requirements for asset managers and asset owners more broadly, including consideration of its entity-level disclosure rules.
