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FCA confirms final rules and guidance for climate-related financial disclosures for listed companies and certain regulated firms

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19 Dec 2021

The Financial Conduct Authority (FCA) has published new climate-related disclosure rules for listed companies and certain regulated firms.

The new rules, which were consulted on in June 2021, follow the introduction of climate-related disclosure rules for most prominent listed commercial companies in December 2020 and are aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

The FCA, in Policy Statement (PS) 21/23, is extending the application of its climate-related disclosure requirements for commercial companies with a UK premium listing to issuers of standard listed shares and Global Depositary Receipts representing equity shares (excluding standard-listed investment entities and shell companies).  Under the new rule, LR 14.3.27R, which will apply for accounting periods beginning on or after 1 January 2022, in scope companies will need to include a statement in their annual financial report setting out:

  • whether they have made disclosures consistent with the TCFD’s recommendations and recommended disclosures in their annual financial 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 and the timeframe within which they expect to be able to make those disclosures.
  • where they have included some, or all, of their disclosures against the TCFD’s recommendations and/or recommended 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 FCA is also including guidance provisions to support in-scope companies in making their disclosures, as set out in LR 14.3.28G to LR 14.3.31G. These are aligned with guidance provisions LR 9.8.6BG – LR 9.8.6EG for premium listed commercial companies. 

Following its publication in October 2021, the FCA are incorporating references to the TCFD’s new guidance on metrics, targets and transition plans and updated implementation annex in both its existing and new guidance provisions – for both premium and standard listed issuers in scope of its rules.  The changes to the guidance provisions relating to the existing disclosure rule for premium listed commercial companies (LR 9.8.6R(8)) to reference the TCFD’s updated and new guidance materials will apply for accounting periods beginning on or after 1 January 2022. As a result, they will not apply for disclosures made in 2022 for premium listed commercial companies’ current reporting periods (though the FCA has stated that these can be voluntarily adopted sooner.

In PS21/24, the FCA confirms that it is introducing a new ESG Sourcebook to its Handbook containing rules and guidance for asset managers, Life insurers and FCA-regulated pension providers to make disclosures consistent with the TCFD's recommendations.  In scope companies will need to make disclosures on an annual basis at:

  • Entity-level: an annual TCFD entity report published in a prominent place on the main website of the company's business setting out how they take climate-related matters into account in managing or administering investments on behalf of clients and consumers
  • Product-level: disclosures (including a core set of climate-related metrics) on the company's products and portfolios made publicly in a prominent place on the main website of the company's business and included or cross-referenced in an appropriate client communication, or made upon request to certain eligible institutional clients.

The guidance, which accompanies the new rules, is intended to help companies determine whether their disclosures are consistent with the TCFD’s recommendations and recommended disclosures, and/or the FCA's requirements.  The new rules will apply from 1 January 2022 for the largest in-scope companies and one year later for smaller firms above the £5 billion exemption threshold.  

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