In 2021 the Financial Conduct Authority told UK asset managers to start reporting how climate change bears on the funds they run. The rules, set out in policy statement PS21/24, phased in from 1 January 2022 for the largest firms and 1 January 2023 for the rest. Managers built the templates, hired the consultants, and filed the reports.
Now, before the regime is four years old, the FCA wants to delete a large part of it. CP26/17, the regulator’s 52nd quarterly consultation, published on 5 June and open until 13 July, proposes removing the product-level climate reports that sit at the centre of the current framework. The FCA’s own estimate of the saving: roughly £20m a year across the industry.
That figure is the story. Not because £20m is large — for a sector administering trillions, it is a rounding error — but because of what it implies about how much use the reports were getting for the money.
What actually changes
The current regime has two layers. At entity level, an in-scope firm publishes an annual report on how it factors climate into managing client money. At product level, it publishes climate metrics — carbon intensity, emissions, scenario analysis — fund by fund, portfolio by portfolio. The consultation leaves the entity layer broadly intact and takes an axe to the product layer.
In its place the FCA proposes “fewer, more targeted and more outcomes-based rules” while keeping the same overall scope: the same asset managers, life insurers and FCA-regulated pension providers, above the same thresholds. Retail investors would get information on how material climate risks could affect a product’s financial performance. Institutional clients would keep the right to request core greenhouse-gas emissions data — but firms would no longer have to publish it in full standing reports.
The regulator is not hedging on why. Michelle Beck, the FCA’s director for wholesale sell-side, said the aim is “cutting complexity in our rules for asset managers, while keeping the focus on clear, useful information.” The subtext, per the FCA’s own review, is blunter: the product-level reports were “often seen as too complex by investors and not widely used.” A regulator rarely says out loud that a disclosure it mandated went unread. This one effectively did.
The saving is in the paperwork, not the maths
Here is the part the cost headline obscures. The £20m does not come from firms doing less climate analysis. It comes from firms doing less climate publishing.
Because institutional clients keep the right to request emissions data on demand, a manager still has to compute portfolio emissions, maintain the data pipeline that feeds them, and keep the numbers current. What disappears is the obligation to format all of it into a standalone public document that, on the regulator’s account, few people opened. The cull is of report production — templating, assurance, formatting, hosting — not of the underlying measurement. The spreadsheets survive; only the covers come off.
That distinction matters for anyone budgeting the saving. A firm whose clients are mostly institutional will still field data requests and still carry most of the data infrastructure. Its £20m share is thinner than the headline implies. The relief is real, but it is concentrated in the compliance-publishing function, not the quant desk.
A lighter rule is not always an easier one
For retail, the FCA is swapping a templated disclosure for a principles-based one: tell investors how material climate risks and opportunities could affect a product’s financial performance. That sounds like less work. It is not obviously easier to get right.
A template tells a compliance team exactly what to fill in. A materiality judgement makes them decide what counts as material — and defend that decision if a client or the regulator later disagrees. Firms trading a checklist for a judgement call are trading a known, tedious cost for an open-ended one. The ones that read this consultation as pure relief are the ones most likely to under-invest in the replacement and get a supervisory letter for it.
Britain is thinning what Brussels is thickening
The direction of travel is the wider signal. The EU is entrenching product-level sustainability disclosure through SFDR and CSRD; the FCA is stripping it back. A UK manager that distributes into Europe still faces the European templates regardless, so the £20m saving accrues mainly to firms whose sales are domestic. For everyone selling across the Channel, this is one more line in the widening gap between two rulebooks they have to satisfy at once.
It also reads as policy, not just tidying. Cutting reporting cost in the name of competitiveness is the growth agenda applied to sustainability rules. The FCA’s framing throughout is cost and usefulness, not climate ambition. That is a deliberate choice about which audience the regime now serves.
What the next five weeks decide
The consultation closes on 13 July, with rules to be finalised in the autumn. That is a tight window. Managers who want to argue the scope — which metrics institutional clients can still demand, how “material” the retail test should be, whether the entity report inherits any of the product layer’s detail — have until then to say so before the templates they built become optional.
The reports are going. The data behind them is staying. Anyone who read the 2023 product filings — a smaller group than the FCA would have liked — will not have much to miss. The firms that treated those filings as a genuine risk exercise rather than a formatting one already have what the new rules will ask for. The rest have five weeks to work out what “useful information” means when nobody is handing them a template.
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