Climate-related disclosures to get stricter for UK plc

In 2020, the FCA introduced a new listing rule on climate-related disclosure for commercial companies with a ‘premium listing’ on a UK stock exchange. It applies to accounting periods beginning on or after 1 January 2021, meaning the first annual financial reports subject to the rule will be published in early 2022. However, the regulator has now confirmed its intention to extend the new rules to other listed issuers.

The new requirements, which were set out alongside a new technical note clarifying existing disclosure obligations, are aligned with global standards set by the Task Force on Climate-related Financial Disclosures (TCFD). They reflect a broader push by policy makers and regulators around the world to address climate risk through the financial markets system.

Here we identify some of the main takeaways from the FCA’s statement and look at some of the challenges that lie ahead for issuers in identifying and assessing climate-related disclosures so as to ensure regulatory compliance.

The TCFD recommendations, UK roadmap and FCA’s new listing rule

The global push to improve the information made available by industry about climate-related risk can be traced to the establishment of the TCFD in 2015 in the immediate aftermath of the historic Paris Agreement on climate change.

In response to a mandate set by the G20’s Financial Stability Board, the TCFD in 2017 set out recommendations on climate-related disclosures designed to better inform investment, credit, and insurance underwriting decisions and improve understanding of where carbon-related assets are concentrated in the financial sector and the financial system’s exposures to climate-related risks.

The TCFD’s recommendations

The TCFD’s recommendations fall under four broad headers: governance; strategy; risk management; metrics and targets.

  • Governance. The TCFD urged disclose of the organisation’s governance of climate-related risks and opportunities, which it said should entail describing the board’s oversight of, and the management’s role in assessing and managing, those risks and opportunities.
  • Strategy. The TCFD recommended the disclosure of the actual and potential impacts of climate-related risks and opportunities on an organisation’s businesses, strategy, and financial planning where such information is material, including a description of the resilience of the organisation’s strategy to different climate-related scenarios.
  • Risk management. The TCFD said organisations should disclose how they identify, assess, and manage climate-related risks, including by describing the related processes it has in place and how those processes play into the organisation’s overall risk management.
  • Metrics and targets. The TCFD recommended the disclosure of metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material, and performance against them.

The TCFD’s recommendations are voluntary, but steps are being taken to mandate climate-related disclosures in a number of jurisdictions, including in Hong Kong where enhanced disclosure requirements will build on the TCFD’s recommendations. In the EU, law makers finalised the Sustainable Finance Disclosure Regulation (SFDR), which applies in the financial services sector, in 2019, while the UK government, in partnership with the FCA and the Pensions Regulator, published a roadmap towards mandatory climate-related disclosures in November 2020.

The UK roadmap envisages rising coverage of disclosure requirements over the period to 2025, with one of the first steps the FCA’s new rules for premium listed companies.

The FCA’s new listing rule

The FCA’s new listing rule requires a company with a UK premium listing to include a statement in its annual financial report setting out:


  • Whether it has made disclosures consistent with the TCFD’s recommendations in its annual financial report;
  • Where it has not made disclosures consistent with some or all of the TCFD’s recommendations, an explanation of why, and a description of any steps being taken or planned in order to be able to make consistent disclosures in the future – including relevant timeframes;
  • Where it has included some, or all, of its disclosures in a document other than its annual financial report, an explanation of why; Where in its annual financial report, or other relevant document, the various disclosures can be found.

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