FCA confirms its approach to implementing UK-endorsed ISSB standards into its disclosure rules and highlights what listed companies can do now to prepare for any future reporting under those standards
14 Aug, 2023
The Financial Conduct Authority (FCA) has published Primary Market Bulletin 45 (the Bulletin) which sets out its approach to implementing UK-endorsed IFRS S1 and IFRS S2 into its disclosure rules, highlights what listed companies can do now to prepare for any future obligations relating to reporting on the International Sustainability Standards Board’s (ISSB’s) standards and explains how it will continue to supervise listed companies’ existing Task Force on Climate-related Financial Disclosures (TCFD).
The FCA expects to consult in the first half of 2024 on proposals to implement disclosure rules referencing UK-endorsed IFRS S1 and IFRS S2 for listed companies. This will take into account the Government’s own endorsement process based on the Government's intention to endorse both ISSB standards within 12 months of their publication. Assuming the Government’s endorsement process is completed within this timeframe, the FCA aims to finalise its policy decision by the end of 2024, with a view to bringing in new requirements for accounting periods beginning on or after 1 January 2025 (with the first reporting from 2026).
The FCA will be consulting on:
- The scope and design of the new regime taking into account its proposed equity listing reforms.
- Transitional measures to allow smooth implementation.
- The possibility of moving from ‘comply or explain’ to mandatory disclosures for listed companies.
- Introducing guidance, aligned with the Transition Plan Taskforce (TPT) Framework, into its Handbook on what a good practice climate transition plan should cover.
Whilst acknowledging that the ISSB standards and transition plan guidance will not replace the TCFD disclosure framework immediately, the FCA ‘strongly encourages’ listed companies to start considering the standards now and to build them into their plans for future reporting. The Bulletin highlights the following actions that companies can take now:
- Continue to improve reporting in line with existing climate-related disclosure rules taking into consideration the TCFD recommendations and accompanying guidance, areas identified for improvement in its Primary Market Bulletins 36 and 42, Technical Note 802.1, FCA and Financial Reporting Council (FRC) thematic reviews and expectations under the IFRS Foundation’s education material.
- Engage early with IFRS S1 and S2, the associated guidance, and the TPT Disclosure Framework and Guidance (once finalised) and consider reporting on a voluntarily basis.
- Engage with the UK endorsement and implementation process for the ISSB standards by responding to the Technical Advisory Committee call for evidence and the FCA’s consultation on implementation, when published.
The FCA will continue to use thematic reviews in 2023/24 to consider TCFD-aligned disclosures made by all listing companies within scope of its existing TCFD-aligned disclosure rules.
The Bulletin is available on the FCA website here.
