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.
The CFD Regulations amend sections 414C, 414CA and 414CB of the Companies Act 2006 (“CA 2006”) in relation to disclosures in a company’s strategic report and renames the non-financial information statement as the non-financial and sustainability information statement (“NFSI”).
The CFD Regulations expand the type of companies that are required to produce an NFSI statement and make it mandatory for the UK’s largest businesses to disclose their climate-related risks and opportunities. The CFD Regulations are part of the UK’s efforts to become the first G20 country to make climate-related financial disclosure mandatory across the economy by 2025.
In-scope companies include:
A traded company (i.e a company any of whose transferable securities are admitted to trading on a UK regulated market, for example the main market of the London Stock Exchange).
An AIM traded company.
A high turnover company, that is, either:
- where the company was not a parent company, a company with turnover for that year of more than £500 million; or
where the company was a parent company at any time within that financial year, if in that year, a group headed by the company had an aggregate turnover of more than £500 million net.
There is also a requirement that the company has more than 500 employees:
where the company was not a parent company in that financial year, the company had more than 500 employees in that financial year; or
- where the company was a parent company at any time within that financial year, the aggregate number of employees for a group headed by that company in that financial year was more than 500.
While the Taskforce on Climate-related Financial Disclosures (“TCFD”) recommendations are not specifically referenced, the climate-related financial disclosures in section 414CB(2A) of the CA 2006 are broadly in line with the four pillars of the TCFD recommendations (governance, strategy, risk management, and metrics and targets) relating to climate risks and opportunities. It is anticipated that the Department for Business, Energy and Industrial Strategy will publish guidance on the NFSI statement requirements in the form of non-binding Q&As. In the meanwhile, in-scope companies should familiarise themselves with the new reporting requirements and be mindful of the potential overlaps with other reporting requirements.