Shearman & Sterling LLP | FinReg | UK Conduct Regulator Consults on Enhancing Climate-Related Disclosures for Listed Companies and Certain Regulated Firms
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  • UK Conduct Regulator Consults on Enhancing Climate-Related Disclosures for Listed Companies and Certain Regulated Firms

    The U.K. Financial Conduct Authority has published two consultation papers that set out new proposals on climate-related disclosure rules for listed companies and certain regulated firms. The proposals follow the introduction of climate-related disclosure rules for the most prominent listed commercial companies in December 2020 that are aligned with the recommendations of the global Taskforce on Climate-related Financial Disclosures. Responses to the consultations may be submitted until September 10, 2021. The FCA is aiming to publish its final rules and policy statements for these proposals by the end of the year.

    The FCA proposes to extend the application of its TCFD-aligned Listing Rule for premium-listed commercial companies to issuers of standard-listed equity shares. This extension would exclude standard-listed investment entities and shell companies. The FCA intends to implement the new rule and related guidance a similar way to the existing rule and guidance for premium-listed commercial companies. In-scope companies would be required to include a statement in their annual financial report setting out, among other things, whether they have made disclosures in their annual financial report consistent with the TCFD’s recommendations, and if they have not, to provide an explanation and description of steps being taken to do so. The FCA proposes that these rules would apply from January 1, 2022, and that the first annual financial reports issued in compliance with the proposed rule would be published in 2023.

    The FCA is also proposing to introduce TCFD-aligned disclosure requirements for asset managers, life insurers and FCA-regulated pension providers, with a focus on the information needs of clients and consumers. In scope firms would comprise:
    • Asset managers: investment portfolio managers, U.K. Undertakings for The Collective Investment in Transferable Securities management companies, full-scope U.K. Alternative Investment Fund Managers and small authorized U.K. AIFMs.
    • Asset owners: life insurers (including pure reinsurers) in relation to insurance-based investment products and defined contribution pension products, non-insurer FCA-regulated pension providers, including platform firms and Self-invested Personal Pension operators, to the extent that SIPP operators provide a ready-made selection of investments.

    Both entity-level and product or portfolio level disclosures would be required. At entity-level, firms would be required to publish on their website, annually, an entity level TCFD report on how they take climate-related risks and opportunities into account in managing or administering investments. Firms would also be required to produce, annually, a baseline set of consistent, comparable disclosures for their products and portfolios, including a core set of metrics. Depending on the type of firm and/or product or portfolio, these disclosures would either be published in a TCFD product report on the main website and in a client communication or be made upon request to certain eligible institutional clients. The FCA’s proposed implementation timetable for these disclosures is:
    • January 1, 2022: the rules would apply for the largest, most interconnected asset managers, being asset managers with assets under management of more than £50 billion and asset owners with £25 billion or more in AuM or administration in relation to in-scope business.  
    • January 1, 2023: the rules would apply for in-scope firms above the proposed £5 billion threshold for both asset managers and asset owners. These firms would be required to make their first disclosures by June 30, 2024, followed by annual disclosures thereafter.
    • January 1, 2024: the rules on providing on-demand disclosures to certain institutional clients would apply to all in-scope firms

    The FCA is also seeking views on other environmental, social and governance issues in capital markets, including green and sustainable debt markets and the increasingly prominent role of ESG data and rating providers.

    View the consultation on climate-related disclosures for listed companies.

    View the consultation on climate-related disclosures for certain regulated firms

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