UK: FCA – Final Rules published simplifying TCFD-aligned product level reporting (Handbook Notice 144)

Back in June, we wrote about the FCA's proposals in CP26/17 to simplify its product-level TCFD disclosure regime, replacing many of the existing requirements in ESG 2.3 with more targeted, outcomes-based rules for both retail and institutional investors. With the publication today of Handbook Notice 144, those changes are now final. Respondents to the FCA’s original consultation were broadly supportive of simplifying the TCFD product-level reporting rules and welcoming a more flexible, targeted regime that reduces compliance burden. So, it is no surprise that the final rules are in substance the same policy the FCA consulted on – but there are some noteworthy refinements worth flagging:

What’s changed since the consultation for communications with retail clients?

The core retail obligation survives largely intact and the FCA is moving forwards with an outcomes-based approach for communicating with retail clients which enables firms to carry out their assessment of climate risks in a way that is appropriate for their product, and to disclose material information through existing communications: firms must periodically consider whether climate-related risks could be materially relevant to the financial performance or return of an in-scope product (ESG 2.3.1BR(1)), and disclose any risks identified in retail communications that provide general information on risk and financial returns (ESG 2.3.1BR(2)).

• However, the final rule drops the requirement to disclose information on climate related opportunities – aligning more closely with the type of information already covered in existing retail risk and return communications, and avoiding overlap with the SDR naming and marketing rules.      The final text also narrows the trigger, clarifying that firms are only required to include information on materially relevant climate-related risks in communications that they already produce, where those communications provide general information on a product’s risk and financial returns. Where applicable, firms may include these disclosures as part of the risk and return information contained in a product summary under the CCI regime.
• Responding to feedback that firms wanted more consistency in how to determine whether climate-related risks are materially relevant, the FCA is of the view that industry collaboration to develop good practice may be helpful.  It has however amended the guidance at ESG 2.3.1CG(1) to clarify that firms should ‘periodically consider whether climate-related risks are materially relevant’ in a manner and frequency appropriate for the product, and may choose to do this as part of their usual risk assessment procedures.

The FCA has confirmed it will not require firms to explain why identified climate risks are assessed as not materially relevant – consistent with the existing approach to retail risk disclosure generally, which focuses on disclosing risks that are material rather than documenting a negative.

There is no transition provision.  As expected, the handbook amendments take effect immediately from 25 September 2026.

What’s changed since the consultation for communications with institutional clients?

The FCA are broadly proceeding with the institutional client communication rules as consulted on, with some targeted changes, restructuring of the rules and clarifications to address feedback. Recognising that clients typically obtain climate information through established commercial relationships, the FCA does not want to disrupt such interactions through prescriptive rules.  As such the institutional "on-demand" regime has been restructured rather than rewritten from a policy perspective – aiming to ensure that clients continue to have a regulatory basis to obtain a minimum baseline of data to support their own climate reporting obligations (Scope 1, 2 and 3 GHG emissions data – which clients can request once per calendar year, per product).  Firms should note:

• As well as the above data, Firms should also provide the following if practicable and permitted under contractual agreements:
  • climate or carbon-related data, if reasonably required by the client for their climate reporting
  • an explanation of the proportion of data that is verified, reported, estimated or unavailable (reinstated from the original rules)
• Whilst the minimum baseline data can be requested once per calendar year, clients may, however, continue to request information from firms outside of the FCA’s rules.
• In response to feedback on how firms should provide information to clients, the FCA is amending its proposed guidance at ESG 2.3.7AG to bring it in line with the overarching principle (PRIN 2.1.1R(7)) that firms should pay due regard to their clients’ information needs and communicate information to them in a way that is clear, fair and not misleading. In keeping with this, the FCA has: 
  • retained the guidance that information should be provided within a ‘reasonable period of time’, and ‘in a format in which, the firm, acting reasonably, considers appropriate’;
  • reinserted guidance to clarify that firms should provide contextual information where relevant, such as an explanation of how information should be interpreted, and any limitations; and 
  • clarified that firms should not provide information which, in the reasonable opinion of the firm, is misleading due to data gaps or methodological challenges that cannot be addressed using proxy data or assumptions.
• Perhaps the most practically significant change from the June draft is a new transitional provision, which was not in the consultation text at all.  Recognising that many firms in scope of these rules will be reporting Scope 1, 2 and 3 GHG emissions annually in TCFD product reports by 30 June each year, the FCA is therefore introducing a transitional provision, to set 30 June 2027 as the start date of the rules for communicating with institutional clients. 

What’s next?

The FCA note CP responses which commented on entity level reporting requirements (not the subject of CP 26/17) – Whilst not explicitly addressing these comments, the FCA have confirmed that they will continue to consider how the entity level rules can be streamlined and enhanced, and will provide an update “in due course.”