News

Newsflash – FCA consults on Listing Rules amendment in relation to provision of the Task Force on Climate-related Financial Disclosures

March 2020

The Financial Conduct Authority (FCA) has published a consultation paper (CP20/3) which proposes a new rule for commercial companies with a UK premium listing requiring them to state whether they comply with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and to explain any non-compliance.

The consultation paper, which follows on from the FCA's related Discussion Paper and Feedback Statement issued last year, proposes to introduce a new continuing obligation in the Listing Rules. LR 9.8.6R(8) (the new climate-related disclosure rule) would require commercial premium-listed companies to include a new statement in the annual report setting out:

  • whether they have made disclosures consistent with the four recommendations and eleven recommended disclosures set out in section C of the TCFD Final Report in their annual financial report (also listed below for convenience);
  • where these disclosures can be found in the annual report; and 
  • a “comply or explain” obligation to explain : 
    • why, if they have not made disclosures consistent with some or all of the TCFD's recommendations and/or recommended disclosures; or
    • why they have included some or all of the disclosures in a document other than their annual report.

Scope of application
The consultation paper makes clear that as the proposed scope is just commercial companies with a UK premium listing, the proposals do not affect open-ended or closed-ended investment companies.

Consultation on guidance for all issuers regarding existing requirements
The FCA is also seeking feedback on draft guidance it proposes to issue, via a Technical Note, on existing obligations set out in EU legislation and in its Handbook, that may already require issuers to disclose information on climate-related (and other environmental, social and governance) matters in certain circumstances. The guidance will be relevant for a wider scope of entities, including all companies with listed securities, not just those with a premium listing. The proposed Technical Note is included in draft as an appendix to the Consultation Paper.

A reminder of the relevant TCFD recommendations

  1. Governance
    Disclose the organsiation’s governance around climate-related risks and opportunities
    1. Describe the board’s oversight of climate-related risks and opportunities
    2. Describe management’s role in assessing and managing climate-related risks and opportunities
  2. Strategy
    Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information of material
    1. Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term
    2. Describe the impact of climate-related risks and opportunities on the organisations’ businesses, strategy and financial planning
    3. Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2˚C or lower scenario
  3. Risk Management
    Disclose how the organisation identifies, assesses and manages climate-related risks
    1. Describe the organisation’s processes for identifying and assessing climate-related risks
    2. Describe the organisation’s processes for managing climate-related risks
    3. Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management
  4. Metrics and Targets
    Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
    1. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process
    2. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas emissions, and the related risks
    3. Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets

Timing
The new rule is proposed to take effect for accounting periods beginning on or after 1 January 2021. This will mean that the first reports issued in compliance with the new rule would be published in 2022 which meets the Government’s commitment under the Green Finance Strategy issued in July 2019. Responses to the Consultation Paper are requested by 5 June 2020.

The press release and Consultation Paper are available on the FCA website.

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