Finance actors and climate-related disclosure regulation

Abstract

Climate-related corporate disclosure has become a favoured regulatory tool, aimed at leveraging financial market logics to help mitigate risks associated with climate change. Following the influential industry-led Taskforce on Climate-related Financial Disclosures (TCFD), increased expectations about climate risk reporting are proliferating in legislation and regulatory guidance. Despite these developments, widespread concern remains about the limits of the disclosure paradigm and the quantity and quality of information being disclosed. Questions of accountability and enforcement are now receiving increased attention, especially in relation to systemically important financial firms, such as banks and insurers. This chapter explores the logic of climate-related disclosure, emerging forms of accountability, and likely future regulatory trends in this area. It does so by using a case study of complaints to the UK Financial Conduct Authority (FCA) against three listed insurance companies by civil society organisation, ClientEarth. It discusses challenges associated with the contested legal concept of ‘materiality’, which underpins many financial market disclosure frameworks, and identifies the need for robust assurance, accountability, and complementary regulatory design for the logic of climate-related disclosure to fulfil its aspirations.