Listed firms can 'comply or explain' on sustainability disclosures
Image: FCA
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The Financial Conduct Authority's new rules on sustainability disclosures by listed companies will apply on a 'comply or explain' basis, a move criticised by campaigners. The change comes just as the EU's pensions and insurance regulator has warned heatwaves will lead to more deaths and sickness.
As the world's increasing temperatures are becoming ever more hazardous to human health, regulators are weakening requirements for climate disclosures. On Wednesday, the Financial Conduct Authority published finalised rules requiring listed companies to report against UK Sustainability Reporting Standards on a comply or explain basis only, following push-back by issuers, even as buy-side and professional services respondents had a preference for mandatory disclosures.
The new rules replace the Task Force on Climate-related Financial Disclosures-aligned requirements. The UK SRS will apply to accounting periods beginning on 1 January 2027, with some transitional reliefs built in.
Head of UK policy at campaign group ShareAction Luke Hildyard said as few companies will escape material climate risk, they must report on it.
"The FCA's alignment with international standards is welcome, but comply-or-explain risks leaving stakeholders, including investors safeguarding more than £3tn of UK pension savings, without complete, reliable and comparable data if some complacent boards choose not to comply. Reporting on social and environmental impact should be foundational to all corporate disclosure.”
In June, the FCA consulted on scrapping TCFD reporting requirements for products in favour of simpler information in line with the Consumer Duty, saying pension trustees could get climate data from managers on request.
Heatwaves to blame for nearly all EU deaths from climate extremes
The FCA's direction stands in contrast to warnings issued on Wednesday by the European Insurance and Occupational Pensions Authority. Eiopa has called on insurers and pension funds to prepare for more heat-related deaths and sickness, as heatwaves have accounted for 97% of fatalities from weather and climate-related extremes in the EU-27 since 1980.
Europe is the fastest heating continent, Eiopa said in a report published on Wednesday. Heatwaves have accounted for 97% of fatalities from weather and climate-related extremes in the EU-27 since 1980, and reduced cold season excess mortality is not expected to offset heat excess mortality in Europe.
The organisation stressed the effect of extreme heat on the liability side of insurers and pension funds, as floods and storms tend to dominate discussions on physical asset losses.
"With the natural catastrophes of recent years, it has become apparent that our physical infrastructure is increasingly at risk from floods, storms and wildfires. But climate change also has quieter, less visible consequences – ones that show up more forcefully in statistics than in photographs," said Eiopa's chair, Petra Hielkema.
"The impact of heatwaves on human health is one of them, and our preliminary study shows that it could become a material risk factor for certain insurance lines and pension providers, despite offsetting factors and strong diversification across products and risks," she added.
"With the natural catastrophes of recent years, it has become apparent that our physical infrastructure is increasingly at risk from floods, storms and wildfires. But climate change also has quieter, less visible consequences – ones that show up more forcefully in statistics than in photographs," said Eiopa's chair, Petra Hielkema.
"The impact of heatwaves on human health is one of them, and our preliminary study shows that it could become a material risk factor for certain insurance lines and pension providers, despite offsetting factors and strong diversification across products and risks," she added.
The warning comes after Europe experienced prolonged heatwaves this summer, accompanied by severe wildfires. Scientists have warned the El Nino weather phenomenon will turbocharge higher temperatures from climate change again next year.
Since 2000, heatwaves have been responsible for around 300,000 deaths in Europe. They are becoming more frequent and extreme at the same time as people aged 80-plus are the fastest growing age group, with elderly people and children particularly vulnerable.
Wildfires, which emit smoke and particles, and the potential spread of vector-borne diseases due to a warmer climate could also affect longevity. Eiopa expects health insurance to be most impacted, along with income protection insurance and workers' compensation insurance in the non-life segment.
In the UK, historically, more deaths were associated with the coldest temperatures than the hottest, but the gap between heat and cold-related deaths is narrowing, according to the Office for National Statistics. In this year's May and June heatwaves, there were about 2,877 heat-associated deaths.
