Clifford Chance

The FCA announcement follows the release of the first two IFRS Sustainability Disclosure Standards – the widely anticipated global reporting standards for corporate sustainability disclosures

Following the release of the first two IFRS Sustainability Disclosure Standards (the "Standards") by the International Sustainability Standards Board (ISSB) (see our recent briefing, Exploring the new ISSB sustainability disclosure standards, for more detail), several jurisdictions including the UK have announced plans regarding the adoption of the Standards.

Given that the UK was the first G20 country to codify the Task Force on Climate-related Financial Disclosures (TCFD) requirements for listed companies, it is perhaps not surprising to see the UK Financial Conduct Authority ("FCA") moving rapidly in response to the publication of the Standards.

In the 45th edition of its Primary Market Bulletin (PMB) issued on 10 August 2023, the FCA welcomed the Standards as delivering a global reporting standard for corporate sustainability disclosures and highlighted its belief that internationally consistent, comparable and useful sustainability disclosures will improve the transparency of listed companies' activities which will, in turn, give investors the information they need to make business, risk and capital allocation decisions. The FCA then went on to set out key features of its process for implementing the Standards and its plans for consultation.

Below are five key takeaways:

1. The UK Government is going through a formal assessment and endorsement process of the Standards, this is expected to take approximately 12 months.

2. The FCA expects to consult in the first half of 2024 on proposals to implement disclosure rules for listed companies referencing a UK-endorsed version of the Standards.

3. The FCA's aim is to finalise its policy position by the end of 2024, with a view to bringing new requirements into force for accounting periods beginning on or after 1 January 2025. The first mandatory reporting would therefore begin from 2026. In the interim, the FCA is strongly encouraging listed companies and their advisers to start considering the standards now, to build them into their plans for future reporting and to consider reporting on a voluntary basis ahead of the potential future requirements.

4. The FCA also expects to consult on moving from the "comply or explain" basis (used for current climate disclosures) to mandatory disclosures for listed companies in respect of these new requirements.

5. The FCA intends to develop guidance regarding the disclosure of "climate-related transition plans" (laying out an entity's targets, actions and resources for its transition towards a lower-carbon economy, including for e.g. reducing its greenhouse gas emissions). Such plans are already captured by the Standards (which require disclosure of transition plans, if an entity has any) but the FCA intends to go further by providing detailed guidance on the content of transition plans by reference to the final outputs from the UK Government's Transition Plan Taskforce (TPT) (which published a draft Framework and Implementation Guidance earlier this year).