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Recent changes to the listing rules for climate-related disclosures

04/03/2022

At a glance

In December 2020, the FCA introduced new climate-related disclosures for premium listed companies that apply on a ‘comply or explain’ basis. On 25 February 2022, the FCA published Primary Market Bulletin 38 that sets out further  climate-related disclosure requirements for premium and standard listed companies, together with the FCA’s disclosure expectations and supervisory strategy.

In line with the FCA’s new ESG Strategy which was released at COP 26, the intention is to increase transparency around issuer’s management of climate-related risks and opportunities.

LR 9.8.6R(8) and LR 14.3.27R now require premium listed commercial companies and certain standard listed companies to include a statement in their annual financial report setting out:

  • Whether they have made climate-related financial disclosures consistent with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and recommended disclosures in their annual financial report.
  • Where they have not made disclosures consistent with some or all the TCFD’s recommendations and/or recommended disclosures, an explanation of why, and a description of any steps they are taking or plan to take to be able to make consistent disclosures in the future – including relevant timeframes for being able to make those disclosures.
  • Where they have included some, or all, of their disclosures in a document other than their annual financial report, an explanation of why.
  • Where in their annual financial report (or other relevant document) the various disclosures can be found.

LR 9.8.6R(8)(b)(ii) and LR 14.3.27R(2)(b) deal with the situation where a listed company has not included climate-related financial disclosures. The FCA considers that:

  • When providing the reasons for not including such disclosures listed companies should provide full, clear, and meaningful explanations for not including such disclosures.
  • Where a listed company provides details of any steps it is taking or plans to take to be able to make those disclosures in the future, and the timeframe within which it expects to be able to make them.

While listed companies may seek the views of third parties when compiling and reviewing the climate-related financial disclosures to be included in their annual financial report, it is ultimately for a listed company, using its knowledge of the company’s actual and expected activities, operating environment, and exposure to physical and transition risks, to ensure that it complies with LR 9.8.6R(8) or LR 14.3.27R.

The introduction of these disclosure requirements for listed companies is a significant change for the market and its issuers, reflecting the FCA’s emphasis on climate-related transparency which will inevitably inform investors’ decisions.

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