Today we have published a Joint Declaration[1] with the Prudential Regulation Authority (PRA), The Pensions Regulator (TPR) and Financial Reporting Council (FRC), welcoming the publication of the Government’s Green Finance Strategy and setting out our shared understanding of the financial risks and opportunities of climate change. We will work in a collaborative way to address these risks.
We look forward to participating in the Government’s new Taskforce, announced as part of their Green Finance Strategy, to look at the most effective way of enhancing climate-related disclosures.
We also welcome the Chancellor’s announcement that the FCA will have to have regard to the COP21* Paris Agreement when advancing our objectives and discharging our duties, and that this will be reflected in the next Letter of Recommendation that the Treasury issues to the FCA. This aligns with our understanding that addressing the risks of climate change and enabling the transition to a low carbon economy serves the public interest and forms part of our strategic objective to ensure that Financial Services markets function well.
We are already acting on climate change in the following ways:
- We published a Discussion Paper[2] on Climate Change and Green Finance, explaining how climate change risks and the transition to a low-carbon economy are relevant to our Mission and inviting views on some key issues.
- We introduced new requirements[3] to improve shareholder engagement and increase transparency around stewardship.
- We are currently reviewing responses to the Discussion Paper[4] we published jointly with the FRC on Building a Regulatory Framework for Effective Stewardship (DP19/01). This work deals with a number of matters relevant to climate change and green finance. In particular, it considers how asset owners and asset managers can most effectively integrate climate change and other environmental, social and governance (ESG) factors into their investment activities.
- We are currently consulting[5] on environmental, social and governance (ESG) disclosures for Independent Governance Committees and expect to publish final rules later this year.
- We launched the Green FinTech Challenge[6] in 2018 aimed at firms developing innovative solutions that will assist in the UK’s transition to a low carbon economy. 9 firms were successful in their applications and will now benefit from the full Innovate service offering.
In the coming months we will provide an update on our work on climate change, providing feedback on responses to our Discussion Paper on Climate Change and Green Finance and setting out next steps.
The Climate Financial Risk Forum[7] will inform our approach to climate change. This is an industry group which we established earlier this year with the PRA, bringing together regulators and industry to advance financial sector responses to the financial risks from climate change. The Forum will meet three times a year with a mandate to set up working groups to develop practical best practice guidance in key areas such as disclosures, risk management, scenario analysis, and innovation.
*COP21: The 21st Conference of the Parties in 2015; 195 countries agreed to keep the increase in global temperatures well below 2 degrees Celsius.