Carbon Tracker believes that we need a financial regulatory regime fit for purpose to address the climate crisis.

This is why we responded to the FCA’s 2023 consultation on the UK Listings Regime as we did – please see here for more detail about what we said.

Carbon Tracker’s response to the Financial Conduct Authority’s (FCA) Engagement Paper 1: Admission to trading on a regulated market, requesting views on the UK’s new listings regime

In our feedback, we support the regulator’s decision to update prospectus regulation and request that it continues to set mandatory requirements for a prospectus for admission to trading on regulated markets. We also strongly encourage that the FCA extends current mandatory requirements to disclosures of material climate-related risk, particularly for fossil fuel producers (and their assumptions about the future), to enable better decision-making and ensure that investors have sufficient, reliable, relevant and comparable information about a company’s financial risk and companies’ securities.

Mandatory requirements provide companies with the necessary regulatory stability and clarity to inform their reporting of climate-related matters. Such information can support market integrity, financial stability and efficient capital markets. In addition, when financial and non-financial information are connected, investors can better price in and act on a company’s financial risks resulting from the implications of climate change, transition risks and the overall challenges predicated on by the Paris Agreement.

We specifically propose that the FCA extends the legal definition of fossil fuel reserves to include an ‘atmospheric viability’ test, in the competent persons report that tests reserves viability against different demand and price scenarios, to sit alongside the existing geological and financial tests that companies already undertake. More details on this proposal, and other recommendations to the FCA,  can be found within the accompanying consultation response.

We are therefore pleased to see the FCA picking up on this idea in their recent follow-up consultation document, published here (see paper CP24/12, pg. 52, 6.44 onwards).