Regulator publishes critique on financial disclosures about climate change

The Financial Conduct Authority (FCA) has concluded its review into firms' climate reporting in line with its rules and released its findings, outlining the next steps moving forward. The review, which focused on climate reporting by asset managers, life insurers, and FCA-regulated pension providers, aimed to assess the effectiveness of the FCA's climate disclosure rules as currently implemented.

The FCA's climate disclosure rules, introduced in January 2022, have increased firms' consideration of climate risks. However, the review found that reports, especially product-level reports, can be too complex and granular for retail investors. To address this, the FCA plans to ease unnecessary compliance burdens by reducing granularity and complexity, particularly for retail investor-facing disclosures.

The updated reporting requirements are focused on firms in scope of both the Taskforce on Climate-related Financial Disclosures (TCFD) and the UK's Sustainability Disclosure Requirements (SDR) rules. The FCA aims to simplify and consolidate sustainability reporting frameworks, considering how SDR aligns with TCFD, International Sustainability Standards Board (ISSB) standards, and transition planning. Firms are allowed, but not required, to align the reporting periods of TCFD entity reports and SDR reports, enabling the possibility of a single, consolidated climate and sustainability report.

The FCA's updated reporting requirements continue to mandate climate-related disclosures consistent with TCFD (and now ISSB) principles but are moving toward simplifying, consolidating, and improving the accessibility of those disclosures for firms and investors alike. The new requirements are intended to clarify the process for firms and support their integration of climate risks into their decision-making processes.

The review also found that firms have become more transparent with their clients and consumers as a result of the FCA's climate disclosure rules. The updated requirements aim to help firms in scope of both the TCFD and SDR rules report efficiently under both regimes. The FCA recognizes the ISSB standards (which supersede TCFD as the global baseline), and plans new UK sustainability reporting standards based on ISSB for corporates, with an aim to maintain international alignment while simplifying reporting frameworks at the firm level.

In brief, the FCA’s updated sustainability reporting requirements continue to mandate climate-related disclosures consistent with TCFD (and now ISSB) principles but are moving toward simplifying, consolidating, and improving the accessibility of those disclosures for firms and investors alike, particularly by integrating SDR and considering the usability for retail investors.

[1] FCA Press Release: FCA announces next steps in climate disclosure (August 2025) [2] FCA Consultation Paper: Simplifying and improving the usability of TCFD-based and SDR reporting (July 2025) [3] FCA Policy Statement: Updating climate disclosure rules for prospectuses (December 2024) [4] FCA Policy Statement: Simplifying and improving the usability of TCFD-based and SDR reporting (August 2024) [5] FCA Feedback Statement: Consultation on Simplifying and improving the usability of TCFD-based and SDR reporting (June 2024)