FCA denied extra powers but pushes for climate change risk disclosure

FCA denied extra powers but pushes for climate change risk disclosure

The government has rejected the plan to give the FCA greater powers to regulate organisations, with the watchdog also seeking companies to be forced to disclose their climate change risks.

FCA denied extra powers but pushes for climate change risk disclosure

Last week, the government rejected the plan to give the Financial Conduct Authority (FCA) greater powers to regulate UK listed companies and issuers of securities that are on the watchdog’s list.

This is despite a number of scandals that have highlighted limits to the FCA’s influence, which faces growing scrutiny of its ability to hold organisations to account.

The government said that it did not “see the case” for the proposed expansion of the FCA’s powers, which would grant it formal powers to recommend to the government changes to its perimeter. This would make it easier for the watchdog to intervene in order to protect businesses from unregulated activities. The perimeter is currently set by the Treasury.

In August, the Commons Treasury committee, chaired by Labour MP Catherine McKinnell, suggested that the regulator be granted these powers. Ms McKinnel said the government’s decision was “disappointing” as giving the FCA greater powers would provide “greater transparency to the process”.

However, the government said: “[this] would add significantly to the FCA’s supervisory responsibilities and have resource implications, carrying the risk that the FCA’s ability to supervise authorised firms is reduced.”

Climate Risk Disclosure

The FCA is also pushing to force companies to disclose climate risk by 2022, which would go further and faster than the UK government’s policies.

Andrew Bailey, the FCA’s Chief Executive, said: “We have an important role to play in creating an environment where firms can manage the risks from moving to a greener economy and capture the opportunities to benefit consumers.”

The watchdog has said that it will put its proposals out for consultation early next year before finalising the new rules.

The move was welcomed by sustainable finance groups. Speaking to the Financial Times, Ben Nelmes, head of public policy at the UK Sustainable Investment and Finance Association said: “Investors need more and better data from issuers to manage the growing physical and transition risks from climate change, and to take advantage of the opportunities from the shift to a net-zero economy.”

However, the FCA said that it would propose the new rules are initially adhered to on a “comply or explain” basis, which will come as a disappointment to some green groups and investors.

The proposal is still a step in the right direction in terms of climate change action as concerns increase about how it could affect the long-term sustainability of the financial system, and comes at a time when climate activities are protesting across London, targeting City institutions and the Bank of England.

Resources & Whitepapers

How to optimise your compliance lifecycle

How to optimise your compliance lifecycle

3m
The new rules of accounting

The new rules of accounting

3m
5 ways internal productivity can boost your profitability

5 ways internal productivity can boost your profitability

3m
Crushing the Four Barriers to Growth

Crushing the Four Barriers to Growth

3m

Related Articles

What is ARGA? Brydon makes recommendations for stronger audit regulator

Accounting Firms What is ARGA? Brydon makes recommendations for stronger audit regulator

3w Chris Jewers
FRC revises standards in bid to strengthen audit confidence

Accounting Standards FRC revises standards in bid to strengthen audit confidence

1m Chris Jewers
FCA: Adviser charging an ‘emotive’ subject

Practice FCA: Adviser charging an ‘emotive’ subject

2m Chris Jewers
Top 40 International Networks, Associations and Alliances: Growth across the board

Accounting Firms Top 40 International Networks, Associations and Alliances: Growth across the board

2m Philip Smith, Reporter
Video: Integrated Reporting – A corporate reporting framework fit for the 21st Century

Corporate Governance Video: Integrated Reporting – A corporate reporting framework fit for the 21st Century

2m Tom Lemmon
Applying IFRS 16: Achieving compliance and still managing the day job

Regulation Applying IFRS 16: Achieving compliance and still managing the day job

10m Innervision | Sponsored
Everything you need to know about IR35

Regulation Everything you need to know about IR35

10m Rebecca Goodman
FRC: new “rigorous requirements” for Stewardship Code

Corporate Governance FRC: new “rigorous requirements” for Stewardship Code

12m Emanuela Hawker, Reporter