The UK’s Financial Conduct Authority (FCA) recently published its Policy Statement on “Enhancing climate-related disclosures by standard listed companies”.[1] This follows a consultation carried out by the FCA in June 2021. The FCA has decided to extend the climate-related disclosure requirements that currently apply to UK premium listed commercial companies to (1) issuers of standard listed shares and (2) issuers of Global Depositary Receipts (GDRs) representing equity shares.[2] We expect this to have particular implications for GDR issuers, which may be required to grapple with climate-related disclosure requirements for the first time as a result of the new rules.

Under the current regime,[3] premium listed commercial companies are required to include a statement in their annual report for an accounting period beginning on or after 1 January 2021 setting out whether they have made disclosures in line with the recommendations and recommended disclosures of the Taskforce on Climate-related Financial Disclosures (TCFD).[4] Where they have not done so, they must explain why and set out 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. Although the regime is therefore technically a “comply or explain” regime, the FCA has set out guidance that it would ordinarily expect issuers to be able to make climate-related financial disclosures consistent with the TCFD recommendations and recommended disclosures (i.e. comply rather than explain why they have not complied), except where they face transitional challenges in obtaining relevant data or embedding relevant modelling or analytical capabilities.

The same disclosure requirements will now apply to issuers of standard listed shares and GDRs (subject to the exceptions outlined above) in their annual reports for accounting periods beginning on or after 1 January 2022.[5] In practice, this means that the required disclosures will need to be included in annual reports published from early 2023 onwards.

The FCA has also made certain amendments to the disclosure requirements and related guidance applicable to both in-scope premium and standard listed issuers, including:

  • in order to keep pace with the evolution of the TCFD framework and maintain international consistency, incorporating references to the recently updated TCFD Guidance on Implementing the TCFD Recommendations and the recently published TCFD Guidance on Metrics, Targets and Transition Plans;
  • providing additional guidance related to the TCFD’s finalised guidance on transition plans, such that where making disclosures on transition plans as part of its strategy disclosures under the TCFD’s recommendations and recommended disclosures, a listed company that is headquartered or operates in a country that has made a net zero commitment (such as the UK) is encouraged to assess the extent to which it has considered that commitment in developing and disclosing its transition plan. Where it has not done so, it is encouraged to explain why; and
  • encouraging listed companies when making their disclosures to consider the Sustainability Accounting Standards Board (SASB) metrics for their sector against the TCFD’s recommendations, as appropriate.

This is the latest in a series of new climate-related disclosures with which companies incorporated and/or listed in the UK will need to grapple. Please refer to our latest blog post (available here) for an overview of the recently announced mandatory climate-related financial reporting for large public and private UK-incorporated companies.

Cleary Gottlieb’s leading sustainability practice is ideally placed to help in-scope companies navigate and prepare for the new rules. Please contact the authors of this post or any member of our sustainability practice listed on our website if you would like to discuss further.

[1] See: FCA Policy Statement PS21/23: Enhancing climate-related disclosures by standard listed companies, available here.

[2] There are exceptions for standard listed investment entities and shell companies.

[3] See: Listing Rule 9.8.6(8)R.

[4] Available here.

[5] See: Listing Rule 14.3.27R (for issuers of standard listed shares) and Listing Rule LR 18.4.3R (for issuers of standard listed GDRs).