Proposed new climate-related disclosures for listed companies

The FCA’s proposals for new climate-related disclosures for listed companies (set out in CP 20/3) are as follows:

New climate-related disclosure rule

Commercial companies with a UK premium listing would have to include a statement in their annual financial reports stating:

• whether they have made climate-related financial disclosures consistent with the four recommendations and 11 recommended disclosures in the Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures (TCFD);
• if some of that information is included in another document, what that document is and where it is and why the disclosures are in that document;
• if disclosures are not included in either of the above, a reasoned explanation as to why not; and
• where in the annual financial report (or other document) the various disclosures can be found.

It would not be mandatory disclosure at this point as not all of the TCFD’s recommendations may be currently achievable. For example, some issuers may not yet have the data and capabilities needed to model and report on some scenarios as set out in the recommendations.

It would apply to sovereign-controlled commercial companies but not to open-ended or closed-end fund.

Issuers would be expected to consider various TCFD guidance materials when making their disclosures.

The rule would, however, refer to a specific version of the TCFD’s publications – currently the June 2017 versions.

Consistent with the TCFD’s recommendations, recommended disclosures for “strategy” and “metrics and targets” would only need to be included if considered material.

“Governance” and “risk management” disclosure would always need to be included, regardless of nationality.

Sponsors would be expected to consider whether companies have established procedures to enable them to comply with this new rule as part of the work they usually undertake when giving their declarations for a new applicant to listing.

New Technical Note

A new Technical Note will provide guidance to all listed issuers on existing obligations in EU legislation and the FCA Handbook that may already require issuers to disclose information on climate-related (and other environmental), social and governance (ESG) matters in certain circumstances.

Regulated entities

As guidance develops and relevant data becomes more readily available, the FCA expect to consult on expanding the scope to more issuers and to strengthen the compliance basis.

Any financial services firms that fall within this rule are only expected to comply in their capacity as issuers, rather than regulated firms. Asset managers in particular are not expected to comply with supplementary guidance produced by TCFD.

The FCA is currently considering how best to enhance climate-related disclosures for regulated firms, asset managers and life insurers.

Next steps

Responses to the consultation were due by 5 June 2020 but the FCA has extended the deadline to 1 October 2020. The FCA was aiming to publish a Policy Statement with final rules and the Technical Note later in 2020.