The FCA is proposing new measures to force financial services firms to disclosure how they disclose climate change risk as it zones on in the investments pension funds make.
The regulator has released a discussion paper today looking atthe effects that climate change and switching to a low carbon economy will have on the UK’s financial markets and consumers.
The regulator notes that the demand for green financial services has grown in the UK, and that some asset managers and retail banks are capitalizing on changing consumer need.
The FCA sounds a warning on the risks that climate change could pose, especially in pensions, considering the long-term nature of the investments, and for the UK insurance sector more generally.
The regulator stressed the importance of taking climate change into account, particularly in case of workplace pension schemes, as over 90 per cent of schemes have their savings in default investment strategies.
The City watchdog is looking to add to the responsibilities for Independent Governance Committees, which overses workplace pensions, to require them to report on their scheme’s environmental, social and governance investing credentials.
FCA chief executive Andrew Bailey says: “It is widely recognized that the risks from climate change – both physical and those resulting from the transition to a low carbon economy – will affect the risks to, and therefore value of, some kinds of investments.
“The FCA can play a key role in providing more structure and protection to consumers for green finance products and ensuring that the market develops in an orderly and fairway which meets users’ needs.”
The regulator will be taking feedback until January 31 next year.