Climate change and sustainable finance

Sustainability factors may pose material risks to regulated firms and markets. In particular, climate-related risks are systemic and will have impacts across the economy, including financial services and the consumers they support. Financial services and markets also have an important role to play in reducing carbon emissions and supporting the transition to a more sustainable future.

Our regulatory approach aims to ensure that market participants manage the risks of moving to a more sustainable economy, as well as the risks from a changing climate. 

We aim to ensure that consumers and market participants are provided with trustworthy sustainability-related information to help them make informed decisions. This helps improve competition by ensuring that firms do not gain an unfair advantage by making unsubstantiated sustainability claims.  

The Government aims to establish the UK as a global hub for sustainable finance activity[1] and to implement a world-leading regulatory framework. 

We actively contribute to international standard-setting. Through collaboration and influence, we champion the harmonisation of global standards to promote open, interoperable and resilient markets.

Anti-greenwashing rule

Our anti-greenwashing rule protects consumers from misleading sustainability claims and helps them to make informed choices. It also ensures fair competition among firms in a changing market. The rule requires that all sustainability-related claims be fair, clear, and not misleading.

This rule was introduced as part of the broader SDR and investment labels regime (PS23/16)[2] and came into force on 31 May 2024. We also published guidance in FG24/2[3] to support its implementation.

Sustainability disclosure: asset managers and FCA-regulated asset owners

High quality, comparable information helps clients and consumers make better informed decisions about their investments. We've introduced measures, outlined below, to help increase transparency and trust in the sustainable investment market, both at an entity and product level.

Climate-related disclosure requirements

We introduced rules and guidance[4] for certain asset managers and FCA-regulated asset owners to make mandatory disclosures consistent with the Taskforce on Climate-related Financial Disclosures (TCFD) on an annual basis at:  

• Entity level – setting out how climate-related risks and opportunities are taken into account in managing or administering investments on behalf of clients and consumers.
• Product or portfolio level – a baseline set of consistent, comparable disclosures, including a core set of metrics.

Sustainability Disclosure Requirements (SDR) and investment labels

We've introduced a package of measures[5] that apply to asset managers to help consumers navigate the market for sustainable investment products, give them better information, minimise greenwashing and enhance trust. This includes:

• Four investment labels.
• Naming and marketing rules.
• Consumer-facing information.
• Detailed information in pre-contractual, ongoing product-level, and entity-level disclosures, and
• Requirements for distributors to ensure that information is made available to consumers.

These measures raise standards for industry, starting with UK funds.

Sustainability disclosure: listed companies

Financial markets rely on high-quality and comparable sustainability disclosures to inform asset pricing and capital allocation. We have disclosure rules for certain listed companies based on the TCFD recommendations, which aim to improve the quality and consistency of climate-related information in the market. This allows firms to better assess risks and opportunities within their own businesses and in those they invest in or finance.

We intend to consult on how listed companies will adopt UK Sustainability Reporting Standards, which are based on international sustainability reporting standards, promoting global alignment and the growth of the UK as a centre for sustainable finance. This will also include our proposed approach to the disclosure of transition plans.

Find out more about the key milestones and the TCFD, ISSB, and TPT[6].

ESG ratings

As financial services firms integrate environmental, social, and governance (ESG) factors into their activities and expand their products in this space, they are increasingly reliant on third-party ESG data and ratings services. We welcome [7]the Government’s publication of its consultation response[8] and the draft legislation on bringing ESG ratings providers into regulation.  

The Treasury is currently finalising the scope of the regulatory regime for ESG ratings providers. Following this, we intend to consult on proposed rules later in 2025. The regime will improve the transparency and quality of ESG ratings.  

In 2023, we supported the launch[9] of an industry-led code of conduct for ESG ratings and data product providers, which is grounded in the IOSCO recommendations. We continue to encourage both ESG data and ratings providers to sign up to the code.   

Financing the transition to a more sustainable economy

There has been a significant global shift towards lower carbon economies. This provides opportunities and challenges for financial firms. There are also wider opportunities for the UK as a global centre for raising transition finance.  

We supported the Transition Finance Market Review in 2024 and sit on the Transition Finance Council’s Strategic Steering Group as an observer.

The FCA is focusing on ensuring market integrity in this area, particularly where firms make claims about green or transition products. More broadly, we are working with the market and other stakeholders to support UK firms to finance the transition through:

• The decarbonisation of existing assets.
• Scaling climate solutions that can help the wider economy decarbonise. 

Supporting sustainable finance

Our work in sustainable finance goes beyond setting rules. We collaborate with industry and international partners to build capability, foster transparency, and support effective stewardship to support growth in UK financial services.