The agreement highlights the importance of addressing nature-related matters to advance corporate sustainability. It reflects a shared commitment between EFRAG and TNFD to enhance transparency on biodiversity and ecosystems matters.

The agreement builds on a long-standing collaboration between EFRAG and TNFD, which resulted in alignment of the European Sustainability Reporting Standards (ESRS) with the TNFD’s recommended disclosures. The ESRS have been developed by EFRAG and were adopted by the European Commission in July 2023.

As a next step, EFRAG and TNFD will publish a detailed interoperability mapping table illustrating the alignment of ESRS with the TNFD recommendations. The table is expected to be published early in 2024.

For more information, please click to see the press release on the EFRAG website.

In its final comment letter, EFRAG welcomes the package of the annual improvements included in the exposure draft and agrees with the majority of the proposed amendments.  In EFRAG's view, they would improve consistent application and understandability of the IFRS Accounting Standards.

However, EFRAG recommends the IASB to clarify the interaction between IFRS 9 and IFRS 16 as part of a narrow-scope standard-setting project and does not recommend to amend paragraph 2.1(b)(ii) as part of the Annual Improvements – Volume 11.  EFRAG also recommends a reconsideration of the proposed amendment to IFRS 10 on de facto agents.

The press release and the final comment letter are available on the EFRAG website.

The press release states that these documents cover the most challenging aspects regarding the implementation of ESRS, which were adopted by the European Commission in July 2023. They are as follows:

• Draft EFRAG IG 1 Materiality assessment implementation guidance, describing the reporting requirements on the materiality assessment process including an illustration of possible steps of the process and FAQs on the double materiality assessment.
• Draft EFRAG IG 2 Value chain implementation guidance, describing the reporting requirements on the value chain during the materiality statement, for impacts, risks and opportunity management as well as metrics and targets, including the reporting boundary of the group for sustainability reporting, FAQs to provide further information and a 'value chain map'.
• Draft EFRAG IG 3 Detailed ESRS datapoints implementation guidance, presenting the complete list of ESRS requirements in an Excel format. For this document, an explanatory note is also available.

The documents are proposed to be non-authoritative.

For more information, including on how to provide feedback on the documents, please see the press release on the EFRAG website.

The update reports on the EFRAG roundtables on the statement of cash flows held on 17 November, 27 November, 1 December and 4 December 2023, EFRAG's Financial Reporting Board (EFRAG FRB) webcast meeting on 7 November 2023, the EFRAG Financial Reporting Technical Expert Group (FR TEG)-CFSS meeting on 29 November 2023 and the EFRAG Financial Reporting Technical Expert Group (EFRAG FR TEG) webcast meetings on 2 November 2023 and 29 November 2023.

The update also lists EFRAG publications issued in November including: 

• EFRAG's Draft Comment Letter in response to the IASB’s Exposure Draft IASB/AI/ED/2023/1 Annual Improvements-Volume 11
• EFRAG's EFRAG-supported academic study on the effects of the adoption of IFRS 15 Revenue from Contracts with Customers on preparers and users of financial statements

The update also covers EFRAG's sustainability reporting and related activities.

Please click to download the November 2023 EFRAG Update from the EFRAG website.

With this announcement, the Trustees intend to give clarity to the market about stability and continuity of the ISSB’s leadership. The press release states that the early reappointment reflects the Trustees’ appreciation for the ISSB delivering requirements designed to create a truly global baseline of sustainability disclosures. Under Mr Faber’s leadership, the ISSB will continue to engage with jurisdictions on regulatory adoption of its standards, support companies implementing the standards and other technical activities.   

The ISSB leadership also includes two Vice-Chairs. Sue Lloyd started in her role in March 2022, while Jingdong Hua commenced his role in October 2022. Their initial four-year terms continue into 2026.

For more information please click the press release on the IFRS Foundation website.

In the speech, Mr Liikanen confirmed the following three further commitments in the IFRS Foundation’s efforts to support efficient and resilient capital markets through robust sustainability-related financial disclosures:

• Implementing the IFRS Foundation’s capacity building programme so that developing and emerging jurisdictions are better placed to adopt and use IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures;
• Advancing jurisdictional adoption of IFRS S1 and IFRS S2 through bilateral dialogues with governments and regulators. To achieve this, the IFRS Foundation will continue to work closely with both the International Organization of Securities Commissions (IOSCO) and the Financial Stability Board who play essential roles in the adoption work; and
• Advancing new standard-setting initiatives to build out the global baseline of sustainability-related disclosures following feedback to the recent consultation on the ISSB’s future agenda.

Please click to access the transcript of the speech via the press release on the IFRS Foundation website.

The press release states that the main objectives of the draft guidelines are to:

• Ensure that the supervision of listed entities’ sustainability information under the Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Standards (ESRS) and Article 8 of the Taxonomy Regulation is carried out by national competent authorities in a converged manner; and
• Establish consistency in, and robust approaches to, the supervision of listed entities’ sustainability and financial information to facilitate increased connectivity.

As a next step, ESMA will consider the feedback it receives on the draft guidelines and expects to publish the final guidelines by Q3 2024.

Please click to access the draft guidelines via the press release on the ESMA website.

The amendments to IAS 1 Presentation of Financial Statements are:

• Classification of Liabilities as Current or Non-current (issued on 23 January 2020);
• Classification of Liabilities as Current or Non-current - Deferral of Effective Date (issued on 15 July 2020); and
• Non-current Liabilities with Covenants (issued on 31 October 2022).

The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 20 December 2023.

The Policy Statement, which follows the FCA’s October 2022 consultation paper, introduces new measures which aim to protect consumers by ensuring that they are provided with all of the information necessary to make informed investment decisions.  The package of measures ultimately aims to provide greater transparency, consistency and trust in the market for sustainable investment products and seeks to minimise greenwashing by companies.  The package supports the delivery of the Government’s ambition for Sustainability Disclosure Requirements and labels, set out in the Roadmap to Sustainable Investing, published in October 2011.   

The final package of measures includes:

• An anti-greenwashing rule for all FCA authorised firms to reinforce that sustainability-related claims must be fair, clear and not misleading.
• Four sustainability investment labels to help consumers navigate the investment product landscape and enhance consumer trust.
• Naming and marketing rules for investment products, to ensure the use of sustainability-related terms is accurate.
• Consumer-facing information to provide consumers with better, more accessible information to help them understand the key sustainability features of a product.
• Detailed information in pre-contractual, ongoing product-level and entity-level disclosures, targeted at institutional investors and consumers seeking more information.
• Requirements for distributors (for example, platforms and advisers) to ensure that product-level information (including the labels) is available to consumers.

The anti-greenwashing rule applies to all FCA-authorised firms who make sustainability related claims about their products and services.  It will come into force from 31 July 2024.

The investment labels, disclosure, and naming and marketing rules apply to UK asset managers.  Firms can use investment labels from 31 July 2024 and the naming and marketing rules for asset managers come into effect from 2 December 2024.

The rules do not apply to portfolio management products and services yet. The FRC will consult on this in due course.

Ongoing product-level and entity-level disclosures for firms with assets under management greater than £50 billion will apply from 2 December 2025 with entity-level disclosures being extended to firms with assets under management greater than £5 billion from 2 December 2026.

Concurrently with the publishing of the Policy Statement, the FCA has also published a consultation on additional guidance related to the anti-greenwashing rule in response to feedback received to its October 2022 consultation.  The consultation closes on 26 January 2024.

A press release, the Policy Statement (PS23/16) and consultation on anti-greenwashing guidance are available on the FCA website.

The plans continue to propose replacing the existing premium and standard listing share categories with a single listing category for commercial company issuers of equity shares (termed “commercial companies” in the consultation). This seeks to balance flexibility and accessibility for issuers, with appropriate disclosure and safeguards to preserve market integrity and support investors’ decision-making both at initial public offering (IPO) and once listed.  

Further to the feedback received to CP23/10, the FCA now proposes additional categories: a “transition category” for existing standard listed companies with a proportionate transfer process should those companies wish to move to the commercial companies category and a category for non-UK incorporated companies with a primary listing on another exchange. It is proposed that for both of these categories the existing standard listing rules are retained which would, therefore, not require annual reporting against the UK Corporate Governance Code.

The FCA proposes to issue a completely new UK Listing Rules sourcebook to re-order and restructure the Listing Rules with the aim of making them more accessible and less complex. The first tranche of the draft rules has been published to accompany CP23/31, with the second tranche due to be published during Q1 2024.

Other proposals in relation to equity listing reform are as follows:

• The removal of eligibility rules requiring a three-year financial and revenue earning track record as a condition for listing, and no longer requiring a ‘clean’ working capital statement, although prospectuses will still require disclosure of a financial track record and working capital statement.
• Removing eligibility and ongoing rules requiring that a company has an independent business and has operational control over its main activities, to create a more permissive approach to accommodate a range of business models and corporate structures.
• Following feedback, retaining the requirement for independence from controlling shareholder via written controlling shareholder agreements and maintaining certain related voting controls (modification had previously been proposed).
• Permitting issuers to have dual/multiple class share structures at admission.
• Moving towards a disclosure-based regime rather than a shareholder voting regime for significant transactions and related-party transactions
• Incorporating the rules for Sovereign Controlled Commercial Companies into the commercial companies category for equity shares, subject to alleviations equivalent to the existing regime.
• A new category for shell companies largely maintaining the existing standard listing rules.
• A single, updated set of Listing Principles and related provisions, including new provisions to strengthen FCA ability to access records and serve notices to issuers.
• With regard to sponsors, the FCA is focusing on the value and benefits of the sponsor role for all parties involved, and recalibrating supervisory and compliance expectations. The FCA proposes allowing wider factors to demonstrate sponsor competence (for instance, employee experience providing relevant advice) and to extend the look-back period for relevant experience from 3 years to 5 years.

The consultation closes on 22 March 2024.

Comments on proposals regarding sponsor competence are however requested by 16 February 2024.

The FCA anticipates publishing a Policy Statement alongside the finalised UK Listing Rules sourcebook by the start of H2 2024, with a two-week implementation period before the new Listing Rules come into effect.

A press release and the full consultation are available on the FCA website.  Deloitte's previous news item on CP 23/10 is available here.

Update 7 March 2024 - CP23/31 included a first tranche (tranche 1) of the new draft UK Listing Rules and explained that a second tranche (tranche 2) would follow later in Q1 2024.  The FCA have now published an updated draft instrument, which contains tranche 2 alongside the original tranche 1 drafting to form a complete draft instrument for the new UKLRs.  The updated draft instrument supersedes Appendix 1 of CP23/31 and should be taken as the full and complete draft UKLRs for consultation purposes.  In a separate instrument, the FCA have also published proposed consequential changes to other FCA Handbook sourcebooks.  

The CP23/31 closing date of  22 March 2024 remains unchanged for comments on the full set of policy positions as well as the tranche 1 draft rules published on 20 December 2023.  However, by exception to the above, the FCA will accept consultation submissions in relation to the additional tranche 2 draft instrument material and the consequential changes instrument until Tuesday 2 April 2024.  Further information on these updates is available on the FCA website.