Focus on ESG Disclosures Ramping Up – Examples From the US

The U.S. Securities and Exchange Commission (“SEC”) announced in March 2021 the formation of a Climate and ESG Task Force in the Division of Enforcement with a mandate to identify material gaps or misstatements in issuers’ ESG disclosures.

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Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022

On 19 January 2022 the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (“CFD Regulations”) were published. They will come into force on 6 April 2022 and apply in respect of any financial year of a company which commences on or after that date.

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Climate Related Disclosures

The Financial Conduct Authority (“FCA”) published its Primary Market Bulletin 36 yesterday.

It introduces specific Task Force on Climate-related Financial Disclosures (TCFD) aligned climate-related disclosure requirements for listed companies and sets out the FCA’s disclosure expectations and supervisory strategy. Transparency remains key to the FCA’s ESG Strategy which was released at COP26.

The listing rule for premium listed commercial companies is set out in LR 9.8.6R(8) and came into force for financial years beginning on or after 1 January 2021. The first annual financial reports including disclosures subject to this rule will therefore be published from January 2022. As these disclosures are deemed to be an ‘accounting requirement’, the Financial Reporting Council (“FRC”) is responsible for keeping these disclosures under review. From 2022, the review of TCFD-aligned disclosures will be embedded into the FRC’s routine reviews of premium listed company annual financial reports.

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London Readies for SPACs

Stock Market

The Financial Conduct Authority has published its final changes to the Listing Rules in order to encourage SPACs (special purpose acquisition companies) to list on the London Stock Exchange. The new rules will come into force on 10 August 2021.

The FCA consulted previously on the listing of SPACs, noting the need to balance investor protection with the desire to encourage SPACs to list on the Main Market.

A SPAC (or blank cheque company) is a shell company which raises cash through an initial public offering of its shares and lists, with the aim of using the funds raised to buy one or more companies later on. Prior to the new rules coming into force, there was a presumption that the FCA would suspend the listing of a SPAC when the SPAC identified a potential acquisition target. This was to protect investors from disorderly markets due to there being insufficient information available to the public at that stage. However, investors saw the suspension as detrimental as they could not then sell their shares, possibly for months.

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Financial Services Act 2021: Changes Ahead


The Financial Services Act 2021 has been published, making it the first financial services primary legislation passed by the UK Parliament since the UK left the European single market.

There are some important future changes that issuers need to be aware of.

  • Issuers’ responsibility for notifying the market of transactions by PDMRs and persons closely associated with them

UK MAR requires persons discharging managerial responsibilities (PDMRs, being essentially senior managers) and those persons closely associated with them to notify both the issuer and the Financial Conduct Authority of their transactions in the issuer’s instruments. Currently, this notification must be made by the PDMR and their closely associated persons to the issuer within three business days of the transaction. The issuer must in turn notify the market within three business days of the transaction. This can be a difficult timeline to meet so the Act will require issuers to notify the market within two working days (“working days” will explicitly exclude England and Wales bank holidays) of receiving the notification from the PDMR and persons closely associated with them. This change is due to come into force on 29 June 2021.

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Restoring Trust in Audit and Corporate Governance: Consultation

Directors’ reporting and the statutory audit have taken a battering in light of recent corporate catastrophes such as Thomas Cook Group plc, Carillion plc and BHS. In response, the government commissioned three independent reviews in 2018: Sir John Kingman’s Independent Review of the Financial Reporting Council (FRC), the Competition and Market Authority (CMA)’s Statutory Audit Services Market Study and Sir Donald Brydon’s Independent Review of the Quality and Effectiveness of Audit.

  • The FRC Review recommended that the current regulator, the FRC, be replaced.
  • The Brydon Review concluded that statutory audit needs to become more informative and helpful to users.
  • The CMA Market Study called for new measures to increase quality, competition and resilience in audits.

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