FCA proposes simplified climate reporting rules for investment products

The Financial Conduct Authority (FCA) has proposed simplified climate reporting rules for investment products, in a move it said could save investment firms around £20m a year.

The regulator claimed these savings could be made by replacing detailed product-level reports based on the Task Force on Climate-related Financial Disclosures (TCFD) with simplified targeted information for retail investors, in line with the Consumer Duty.

Under the proposals, retail investors will receive relevant information on how material climate risks could affect a product’s financial performance.

Meanwhile, institutional clients would be able to request key emissions data from firms, but this would no longer need to be published in full reports.

The changes aim to give investors better insight in how climate risks could affect investment performance, while reducing ‘unnecessary’ costs to firms.

In a review of the current rules, the FCA found that while they had improved firms’ awareness of climate risks, product-level reports were often seen as too complex by investors and not widely used.

“As part of being a smarter, more proportionate regulator, we’re cutting complexity in our rules for asset managers, while keeping the focus on clear, useful information for investors,” commented FCA director of wholesale buy-side, Michelle Beck.

“These proposals will make it easier for firms to communicate with their customers in ways that genuinely inform and engage them.”

The consultation is open until 13 July 2026, with the FCA aiming to finalise and implement the rule change later in the year.

Broadstone investment director and head of ESG advisory, Deon Dreyer, said the FCA was 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," Dreyer continued.

“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.”

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