Background
Drax announced the FCA investigation via RNS on 28 August 2025, stating that the FCA had commenced an investigation covering the period from January 2022 to March 2024, in relation to its statements to the market on biomass sourcing and the compliance of its 2021, 2022 and 2023 Annual Reports with the Listing Rules and Disclosure Guidance and Transparency Rules.
On the same day, the FCA confirmed it had opened an investigation into Drax, following enquiries made in the wake of Ofgem’s closure in August 2024 of its investigation into Drax’s reporting of biomass profiling data under the Renewables Obligation scheme. Whilst Ofgem did not find evidence of deliberate misreporting, it concluded that the company had inadequate governance and data controls. The Ofgem investigation in turn followed public criticism of Drax by environmental groups and campaigners and in the media.
The FCA’s confirmation of the Drax investigation was a “reactive confirmation” – one of the new categories of announcement introduced under Policy Statement PS25/5 and the revised Enforcement Guide, which we covered in detail in our November 2025 briefing. The reactive confirmation category permits the FCA to confirm that it is investigating where the investigation has already been made public by the firm itself, an affiliate, or another UK or overseas authority.
The FCA’s findings
The FCA has now confirmed, around ten months after the investigation had commenced, that it undertook an extensive investigation following “concerns raised” regarding disclosures to the market about the sustainability of Drax’s Canadian biomass. The FCA says that thousands of pages of complex material were reviewed as part of the investigation, and that individuals from the company were interviewed. The FCA’s focus was on areas within its remit – specifically, whether Drax’s Annual Reports and Accounts between 2021 and 2023 contained misleading statements or omitted important information that investors needed to know. Following all this activity, the FCA did not find evidence that they considered justified any further action.
Why is this significant?
This is one of the first publicly confirmed investigations to be closed under the FCA’s new transparency framework. While the FCA’s revised approach to publicising enforcement investigations attracted significant attention – and, initially, considerable controversy – when it was first proposed, the Drax closure demonstrates the new framework in practice: announcement, investigation, and closure, all in the public domain. In this case the FCA investigation was closed after ten months and the FCA reiterated that it will close cases “as swiftly as possible” where evidence does not support proportionate action.
As we noted in our November 2025 briefing, the FCA’s enforcement transparency initiative signals a continued focus on accuracy of disclosures and governance, including in respect of ESG-related matters. The FCA’s emphasis on the importance of accurate reporting to market integrity – “Accurate reporting is crucial to the integrity of our markets, and vital so investors can make informed decisions” – reinforces the message that the regulator takes listed company disclosure obligations seriously, even where the subject entity is not a regulated financial services firm. Listed companies, and those advising them, should continue to pay close attention to the accuracy and completeness of their annual reports and market-facing statements, particularly in areas attracting public and political scrutiny such as ESG and sustainability.
Key takeaways for firms
The Drax case is a useful reminder of the FCA’s new enforcement transparency regime and an illustration of how it works in practice where an investigation is publicly confirmed but then closed. Firms facing potential or actual FCA scrutiny may take comfort from the fact that the FCA remains committed to closing cases swiftly where the evidence does not justify further action.
However, the reputational impact of a public investigation announcement cannot be underestimated and even ten months of scrutiny involving responding to requests for information and a series of interviews with the senior management team can represent a significant burden for firms and their staff. In this case, those ten months followed a previous regulatory investigation itself lasting for over a year.
In addition, whilst neither Ofgem nor the FCA confirms the origin of the investigation, the FCA announcement refers to “concerns raised”. Companies face significant exposure from whistleblowers and environmental and other campaign groups across a range of issues particularly when they prompt enquiries from a number of different regulators. The process of dealing with these can take years and involve the company in significant time and expense.
Practical steps that firms can take with a view to mitigating such risks include:
- maintaining good governance around public disclosures and reporting, including the rationale for decisions and internal check and challenge, so that materials are readily available and can be provided to regulators in the event of any enquiries;
- ensuring they have robust speak up, investigation and crisis management plans and regulatory engagement strategies in place;
- taking seriously and responding promptly to any issues or concerns that are raised internally or externally (see our May 2026 briefing on whistleblowing); and
- engaging proactively with the FCA and other regulators at an early stage with a view to managing regulatory expectations, influencing the narrative, and mitigating the reputational impact.