FCA opens a discussion on the impact of climate change and green finance on financial services

The discussion paper sets out how the impacts of climate change are relevant to the U.K. regultor’s statutory objectives of protecting consumers, protecting market integrity and promoting competition.

The FCA seeks input on four key areas in which it considers a greater regulatory focus is warranted: including climate change and pensions; supporting competition and market growth for green finance; ensuring that disclosures in capital markets appropriately give adequate information to investors of the financial impacts of climate change; and the scope for the introduction of a new requirement for financial services firms to report publicly on how they manage climate risks.

“Climate change presents a disruptive and potentially irreversible threat to the planet. The impact of climate change on financial markets is uncertain but legal frameworks – at a global, European and UK level — have already begun to adapt to reflect a move to a low carbon economy,” says Andrew Bailey, chief executive of the FCA, in a statement.

“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,” he adds.

The regulator is seeing feedback on the discussion paper by Jan. 31, 2019.

Also on Monday, the U.K. Prudential Regulation Authority (PRA) issued a consultation on enhancing banks’ and insurers’ approaches to managing climate change risks.

The FCA and PRA also announced that they are establishing a Climate Risk Forum to co=ordinate action and share best practices as they embark on a joint effort to enhance the resilience of the financial system to climate change. The group is expected to have its first meeting in early 2019.