Climate Related Disclosures

The Financial Conduct Authority (“FCA”) published its Primary Market Bulletin 36 yesterday.

It introduces specific Task Force on Climate-related Financial Disclosures (TCFD) aligned climate-related disclosure requirements for listed companies and sets out the FCA’s disclosure expectations and supervisory strategy. Transparency remains key to the FCA’s ESG Strategy which was released at COP26.

The listing rule for premium listed commercial companies is set out in LR 9.8.6R(8) and came into force for financial years beginning on or after 1 January 2021. The first annual financial reports including disclosures subject to this rule will therefore be published from January 2022. As these disclosures are deemed to be an ‘accounting requirement’, the Financial Reporting Council (“FRC”) is responsible for keeping these disclosures under review. From 2022, the review of TCFD-aligned disclosures will be embedded into the FRC’s routine reviews of premium listed company annual financial reports.

Issuers with standard listed equity shares should note that the FCA intends to introduce a similar rule for them to apply for financial years beginning on or after 1 January 2022, with the first annual financial reports including such disclosure published from January 2023.

The FCA regards the implementation of TCFD-aligned disclosures as a first step in their journey to implement an international sustainability standard(s) that covers more than just climate change.  At COP26 the International Financial Reporting Standards Foundation announced it is due to develop a baseline common International Sustainability Standards Board (“ISSB”) to sit alongside the International Accounting Standards Board. The FCA welcomes this significant development and is working with the Department for Business, Energy and Industrial Strategy (BEIS) to endorse and implement the future ISSB ‘climate first’ standard in the UK.

Interestingly, BEIS is also intending to introduce similar climate-related disclosure requirements into the Companies Act 2006 so we can anticipate some overlap in the future between the Listing Rules and the Companies Act.