U.K. Companies Worth $3 Trillion Told to Explain Climate Risks

(Bloomberg) -- The U.K. market watchdog wants big British public companies to disclose more about their exposure to climate risks -- or tell investors why they can’t.

The proposal from the Financial Conduct Authority is part of a growing effort by policy makers and money managers to confront how companies will manage the shift to a lower carbon economy.

The voluntary program could cover 480 issuers with a combined market value of 2.3 trillion pounds ($3 trillion), which is about 60% of the main market at the London Stock Exchange, the FCA said. All companies in the FTSE 100 index would be captured, along with many smaller firms that opted for a premium listing.

“Improved disclosures will support better asset pricing and enable investors to make more informed choices about where to allocate their capital –- which will ultimately support the transition to a low carbon economy,” Andrew Bailey, outgoing chief executive of the FCA and next governor of the Bank of England, said in a statement.

Companies would have to reveal the risks to their business in line with the approach set out by the Taskforce on Climate-related Financial Disclosures. TCFD was founded in 2015 and is chaired by Michael Bloomberg, founder and majority owner of Bloomberg LP, the parent company of Bloomberg News. The entity aims to set global, voluntary standards.

The FCA said it stopped short of mandating disclosure because firms are still developing their abilities to gather and report data. However, the regulator said it could expand the policy to more companies and is also considering how to apply similar rules to money managers and life insurers.

BlackRock Inc., the world’s largest money manager, said in January it will request climate disclosures from the thousands of businesses it invests in. This includes plans for how they’ll operate in a world where global warming is limited to less than two degrees Celsius, as set out in the Paris climate agreement.

To contact the reporters on this story: Silla Brush in London at sbrush@bloomberg.net;Alastair Marsh in London at amarsh25@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Marion Dakers, Ross Larsen

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