Companies will long be familiar with the Financial Conduct Authority’s rules on climate disclosure (LR 9.8.6 R (8) and LR 14.3.27 R). The FCA now intends to consult on updating these TCFD-aligned disclosure rules in light of 2 new IFRS Sustainability Disclosure Standards (ISSB standards) published by the International Sustainability Standards Board (ISSB).
The new standards are IFRS S1 on sustainability-related disclosures and IFRS S2 on climate-related matters disclosing material information about all sustainability-related and climate-related risks and opportunities that could reasonably be expected to affect an issuer’s prospects.
These two new standards are a significant and exciting step towards (near) global consistent and comparable climate-related and other sustainability-related disclosures. The government expects the ISSB’s standards will form a core component of the Sustainability Disclosure Requirements (SDR) framework. This will mean far greater transparency than is currently the case, assisting investors with their decisions and subjecting issuers to closer scrutiny.
The next steps are for the government to undertake a formal assessment and endorsement process which it aims to complete within 12 months of the final standards being published. Assuming this timeframe is adhered to, the FCA aims to finalise their policy position by the end of 2024, with a view to bringing the new requirements into force for accounting periods beginning on or after 1 January 2025. The first reporting would begin from 2026.
Meanwhile, and as part of the on-boarding of the new IFRS S1 and S2, the FCA will consult on the scope and design of its proposed equity listing rule reforms. These reforms include the potential replacement of premium and standard listing categories with a single category of equity shares and a move from the current comply or explain compliance basis to mandatory disclosures for listed issuers.
During this transitional period, the FCA recommends that issuers:
- Continue to improve reporting in line with existing climate-related disclosure rules.
- Engage early with IFRS S1 and S2, the associated guidance, and the Transition Plan Taskforce’s Disclosure Framework and Guidance (once published) and consider reporting on a voluntary basis.
- Engage with the UK endorsement and implementation process for the ISSB standards.
Further information can be found here https://www.fca.org.uk/publications/newsletters/primary-market-bulletin-45