FCA publishes Climate Change Adaptation Report

The Financial Conduct Authority (FCA) has published its Climate Change Adaptation Report (CCAR) giving the FCA’s assessment of how it and the firms it regulates are adapting to climate change.

The CCAR sets out the actions the FCA and the financial services industry have taken to adapt to the challenges of climate change. It is set within the context of the FCA’s strategic approach to climate change, including the transition to net zero by 2050. The report outlines:

The FCA’s climate change and environmental, social and governance (ESG) strategy and how it is evolving;
A timeline of the FCA’s major ESG publications between now and next summer;
The climate-related risks that financial services firms are exposed to, including insurance underwriting risk, credit risk, financial market risk and operational risk;
How firms are addressing and adapting to these climate-related risks and opportunities;
How firms and listed companies are planning to transition to net zero; and
The role of capital mobilisation in financing both climate change adaptation and climate change mitigation.

Coincidental to the issue of the CCAR by the FCA, the FCA, the Prudential Regulation Authority (PRA), The Pensions Regulator (TPR) and the FRC issued a joint statement on the publication of Climate Change Adaptation Reports. Comments from the CEOs of the FCA, FRC, PRA and TPR included in the joint statement are shown below.

Nikhil Rathi, CEO of the Financial Conduct Authority:

“To successfully transition to a net-zero economy requires not only that firms adapt and innovate, but that we regulators do too. That is why we are leading the effort to ensure there are consistent, trusted standards for disclosure investors can rely on. It is also why we are developing a strategy for how the FCA will push industry, using all our regulatory tools, to ensure we can meet the climate change challenge. Our work in partnership with the PRA, TPR and FRC is a vital part of that effort.”

Sam Woods, Deputy Governor for Prudential Regulation, and CEO of the Prudential Regulation Authority:

“Climate change and the transition to net-zero emissions will affect our planet, our economy and our financial system. As a prudential regulator, it is our job to ensure the financial institutions we regulate are prepared for these changes and able to play their part in supporting the transition. Our Climate Adaptation Report sets out how we are going about this, what progress firms have made, and what further work there is to do – from making climate change a core part of our supervisory approach to exploring the relevance of climate change to the regulatory capital framework. I look forward to the PRA continuing this important work.”

Charles Counsell, CEO of The Pensions Regulator:

“The pension industry still has much work to do to build resilience and assess climate-related risks and opportunities. Our adaption report acknowledges that more still needs to be done, but also recognises that practices are evolving, and trustees – and savers – are more engaged with the need to consider climate factors. We remain convinced that a landscape of resilient pensions schemes that protect savings from climate risk is entirely within reach.”

Sir Jon Thompson, CEO of the Financial Reporting Council:

“There is clearly a great deal of focus both on how companies report the impact of their activities on the environment and wider environmental and social challenges to which companies must respond. Companies, auditors, actuaries, investors and others also face a changing regulatory environment and reporting and business activities need to adapt to meet these demands. To do this, a range of challenges need to be addressed to ensure that we build an effective framework fit for the future.

“The FRC encourages companies to report using the TCFD and SASB frameworks and supports the development of global standards for sustainability reporting by the IFRS Foundation. Whilst a lot of good work has happened, there is more to do. Through the cross FRC ESG Climate Group we will develop our strategy on ESG and manage our external and internal focus. Earlier this year we issued our ESG Statement of Intent which sets out some challenges in respect of ESG reporting and outlines the FRC's further actions.”

The FCA’s Climate Change Adaptation Report can be accessed here.

The joint statement is here.

Published 28 October, 2021

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