On 21 December 2020, the FCA published Policy Statement 20/17: Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations (PS20/17).
In March 2020 the FCA issued Consultation Paper 20/3: Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations (CP20/3) in which it set out proposals for a new Listing Rule (LR) for commercial companies with a UK premium listing, promoting better disclosures about how they are managing climate-related risks and opportunities.
In PS20/17 the FCA confirms that it is introducing a new rule in LR 9.8 requiring that commercial companies with a UK premium listing (including sovereign-controlled commercial companies) include a statement in their annual financial report setting out:
- Whether they have made disclosures consistent with the Taskforce on Climate-related Financial Disclosures’ (TCFD) recommendations and recommended disclosures in their annual report.
- Where they have not made disclosures consistent with some or all of the TCFD’s recommendations and/or recommended disclosures, an explanation of why, and a description of any steps they are taking or plan to take to be able to make consistent disclosures in the future – including relevant timeframes for being able to make those disclosures.
- Where they have included some, or all, of their disclosures in a document other than their annual financial report, an explanation of why.
- Where in their annual financial report (or other relevant document) the various disclosures can be found.
The rule is accompanied by guidance to help listed companies determine whether their disclosures are consistent with the TCFD’s recommendations and recommended disclosures. The guidance also clarifies the limited circumstances in which the FCA would expect in-scope companies to explain rather than disclose.
The instrument giving effect to the new rule is set out in Appendix 1 of PS20/17. The new rule will apply for accounting periods beginning on or after 1 January 2021. The first annual financial reports subject to the FCA’s new rule would then be published in spring 2022.
The FCA also confirms in PS20/17 that the regulator is introducing a Technical Note clarifying existing disclosure obligations for a wider scope of issuers. Issuers may, in the FCA’s view, already be required to make disclosures on climate-related and other ESG matters under particular provisions of the LR, Disclosure Guidance and Transparency Rules, the Market Abuse Regulation and the Prospectus Regulation, in certain circumstances. The finalised Technical Note is set out in Appendix 2 of PS20/17. It applies immediately.
The FCA states that it is planning to issue a Consultation Paper in the first half of 2021 on proposals to extend the application of its new rule to a wider scope of listed issuers. It is also considering strengthening the compliance basis of the rule. The FCA is also planning on consulting on potential client-focussed TCFD-aligned disclosures by UK-authorised asset managers, life insurers and FCA-regulated pension schemes in early 2021.