The UK Financial Conduct Authority (the “FCA“) recently published its Discussion Paper (DP23/1) on ‘Finance for positive sustainable change’ (“DP23/1“) as part of its ongoing effort to promote sustainable finance and align the financial sector with the UK’s environmental, social, and governance (“ESG“) goals. DP23/1 draws on the Task
The UK’s Financial Conduct Authority (“FCA”) and Financial Reporting Council (“FRC”) have published the findings of their respective reviews of the first batch of premium listed companies’ Taskforce on Climate-related Financial Disclosures (“TCFD”)-aligned disclosures (the “Reports”). The FCA’s review involved a relatively high-level quantitative assessment of climate-related disclosures made by 171 premium listed companies, and a more detailed qualitative assessment of the alignment of those disclosures with the TCFD Recommendations for 31 of those companies. The FRC’s review, on the other hand, involved a more granular analysis of the disclosures of 25 premium listed companies that are perceived to face greater climate change-related risks.
Continue Reading The UK’s FCA and FRC review the quality of companies’ TCFD disclosures
On April 7, 2022, the federal government of Canada released its Budget 2022 (Budget), which includes significant measures by the Canadian government to build its Net-Zero Economy and to fight climate change. In the Budget, the Canadian government is committed to move towards mandatory reporting of climate-related financial risks across a broad spectrum of Canadian economy, based on the Task Force on Climate-related Financial Disclosures (TCFD) framework. The new reporting requirements will be applicable to, among others, federally regulated banks and insurers, which “play a prominent role in shaping Canada’s economy” – as noted in the Budget.
Continue Reading Canada to Impose Mandatory Climate Disclosures on Banks and Insurers
On December 15, 2021, the Singapore Exchange (SGX) responded to two consultations addressing a range of ESG-related topics that could significantly change the ESG reporting landscape for listed companies in Singapore. The consultations address the implementation of (i) mandatory climate-related disclosures for certain sectors aligned with the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), (ii) mandatory diversity-related disclosures for all issuers and (iii) a list of 27 “Core ESG Metrics” to help listed companies align their ESG disclosures with international standards and best practices on a voluntary basis.
As SGX otherwise requires ESG reporting on a comply-or-explain basis only, these proposals represent a shift toward an increased focus on mandatory climate and diversity disclosures that, in particular, has taken hold among Asian regulators. Just this month, the Stock Exchange of Hong Kong implemented mandatory gender diversity requirements and Hong Kong’s Cross-Agency Steering Group reported “progress towards mandating climate-related disclosures aligned with the TCFD framework by 2025 across relevant sectors”, while a group of Malaysian regulators announced their intention to implement mandatory TCFD disclosures by the end of 2024.
In this Blog Post, we highlight key aspects of the recent SGX announcements and provide guidance on how companies are already implementing ESG frameworks incorporating TCFD and more.
Many UK companies will soon be mandated to make TCFD-aligned disclosures. This follows the Financial Conduct Authority’s (FCA) introduction of the Listing Rules (Disclosure of Climate-Related Financial Information) Instrument in December 2020, which requires companies with a UK premium listing to disclose on a comply-or-explain basis against the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in their annual reports. The FCA and UK Government have held consultations on extending this requirement to standard-listed and large private companies.
To help companies comply with these disclosure requirements, the Financial Reporting Council’s Financial Reporting Lab (the ‘Lab‘) has recently published a ‘TCFD: ahead of mandatory reporting’ report (the ‘Report‘), which provides examples of good disclosure practices by companies that have already voluntarily adopted the TCFD framework. The Report refers to research recently conducted by the Alliance Manchester Business School on the approaches companies have taken to conducting climate-related scenario analysis (the ‘Research‘), which is required in order to comply with the TCFD recommendations. Together, the Report and the Research provide holistic practical advice for companies on making TCFD-aligned disclosures, which is also relevant for non UK based companies who are considering how best to address the TCFD recommendations.
Many factors are putting pressure on corporates and financial institutions to address climate change. The UK is currently rolling out mandatory economy-wide disclosure in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations. Beyond this lies immense investor and stakeholder pressure, including by way of shareholder resolutions, and increased media, NGO
In a significant development in the UK government’s drive towards “greening” the financial system, as part of the transition to a net zero carbon economy, HM Treasury published, on 18 October 2021, a policy paper entitled “Greening Finance: A Roadmap to Sustainable Investing” (the “Roadmap“). The Government’s Green Finance Strategy envisages three phases:
The Roadmap focusses on delivering the first phase through the introduction of economy-wide Sustainable Disclosure Requirements (SDRs). The SDRs aim to bring together existing and new sustainability disclosure requirements under one integrated framework for corporates, asset managers and asset owners, and creators of investment products.
But what obligations will these organisations be subject to under the new SDRs, and how can they best prepare themselves to comply with such obligations?
Continue Reading HM Treasury Publishes Its UK Sustainable Finance Roadmap
It was recently reported, on 8 September 2021, that investors managing USD 2.3 trillion in assets called for standardised climate and environmental disclosure from more than 1,000 privately held portfolio companies. The investors, who joined a growing chorus advocating for improved disclosures around environmental issues, requested the private companies to provide such data through the non-profit disclosure platform, CDP, which provides a mechanism for climate disclosures that align with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD recommendations were published in June 2017, and have accelerated the focus on climate disclosures by providing the leading framework for disclosures relating to the financial impacts of climate-related risks.
But what are the TCFD recommendations, and how can companies prepare for reporting in compliance with them?
Continue Reading TCFD Recommendations: An Update on Climate Disclosures