Talking Climate: The FCA's new climate change disclosure

With the global focus on the ongoing COVID-19 pandemic, many missed the FCA's proposals in March, outlining new climate-related disclosure requirements for companies with a premium listing. The proposals have largely been welcomed in the push for sustainable finance & investment, and a low-carbon economy.

The FCA's proposals would apply new rules to companies with a UK premium listing, including to companies that are sovereign-controlled. The proposals are in line with the approach taken by the Taskforce on Climate-related Financial Disclosures (TCFD). Companies would have to make disclosures in their accounts which set out:

a) whether they have made disclosures consistent with the TCFD's recommendations and recommended disclosures in their annual financial report;

b) where they have:

a. not made disclosures consistent with some or all of the TCFD's recommendations and/or recommended disclosures; or

b. including some or all of the disclosures in a document other than their annual financial report

an explanation of why; and

c) where in their annual financial report (or other relevant document) the various disclosures can be found.

The consultation will end on 5 June 2020 and the new rules are proposed to take effect from accounting periods beginning on or after 1 January 2021.  However, provisions may be made to take account of current circumstances. 

Analysis

Initially, it appears that this rule will only apply to companies with a premium listing, but it is likely that the FCA will seek to extend it to a wider set of companies. For now, the FCA are not proposing to apply the new requirements to investment companies, including investment trusts. 

This new disclosure is in line with the Government's Green Finance Strategy and it is encouraging to see the FCA implementing the TCFD's recommendations.

With climate change and sustainable investing very much at the forefront of investors' minds, we may be at the beginning of a new wave of regulation and climate disclosures, aiming to facilitate our transition to the low-carbon economy of the future.

If you have any queries on the above requirements, please contact your usual Howard Kennedy contact, Jonathan Cohen or Jack O'Shea.