The FCA has published proposals to simplify climate reporting for investment products which it says could save investment firms around £20m a year, and Deon Dreyer, Investment Director and Head of ESG Advisory at independent financial services consultancy Broadstone has commented.
The regulator estimates it could deliver these savings by replacing detailed product-level reports based on the Task Force on Climate-related Financial Disclosures (TCFD) with simpler, more targeted information for retail investors, in line with the Consumer Duty.
The changes aim to give investors clearer insight into how climate risks – such as floods, storms and other extreme weather events – could affect investment performance, while reducing unnecessary costs to firms.
Deon Dreyer, Investment Director and Head of ESG Advisory at Broadstone has said: “The FCA is right to recognise that the emphasis on climate disclosures should be towards providing helpful information for investors.
“Product-level TCFD reports can be highly technical documents that are difficult for retail investors to navigate, so a move towards clearer and more targeted disclosures should help improve engagement and understanding.
“Climate risk remains a financially material consideration for long-term investors and the challenge will be ensuring that simplification does not come at the expense of transparency.
“Investors should continue to receive meaningful information about how physical climate risks and the transition to a lower-carbon economy could affect investment outcomes.
“The proposals reflect a broader shift towards more pragmatic, outcomes-focused regulation, with firms expected to communicate risks in a way that consumers can genuinely understand.
“If implemented carefully, this could reduce unnecessary compliance costs while improving the quality of information investors use to make decisions.”
Main image: climate change, kelly-sikkema-_whs7FPfkwQ-unsplash
