Several recent publications from The Basel Committee on Banking Supervision to note: (a) a consultation paper on the prudential treatment of banks' cryptoasset exposures; (b) some high level considerations on proportionality; and (c) principles for the effective management and supervision of climate-related financial risks (including those relating to corporate governance, internal control and risk assessment).
The Government has published guidance for those companies and limited liability partnerships subject to the new climate-related financial disclosure requirements introduced by the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 and Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022: see here (pdf).
The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 were made earlier this week and come into force on 6 April: see here or here (pdf). The accompanying explanatory memorandum, available here (pdf), explains that the Regulations "... will require certain companies to report climate-related financial information in the Non-Financial and Sustainability Information statement which forms part of the Strategic Report. The information to be disclosed will be descriptions by the company of the climate-related risks and opportunities it identifies as material for its business; its governance and risk management approaches to these; how these risks and opportunities impact its strategy and business model; and the targets and performance indicators it applies to managing them" (para. 7.5).
The Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022 were laid before Parliament today and come into force on 6 April: see here or here (pdf). Their purpose is to require certain large UK LLPs to report climate-related financial information in their Strategic Reports or Energy and Carbon Reports. Further information is available in the accompanying explanatory memorandum: see here (pdf).
The Financial Conduct Authority has published final rules and guidance in respect of the climate-related financial disclosures required by (a) the issuers of standard listed shares and (b) FCA regulated asset managers and asset owners: see, respectively, here (pdf) and here (pdf).
The new rules come into effect on 1 January 2022, with asset managers and asset owners subject to a phased period of implementation based on firm size. Issuers will be required to disclose, in their annual financial reports, whether - and if not, why - their disclosures meet the recommendations of the Taskforce on Climate-related Financial Disclosures.
Last week the IFRS Foundation announced: [1] the formation of a new International Sustainability Standards Board - to consolidate the work of existing organisations including the Climate Disclosure Standards Board - with the purpose of developing comprehensive sustainability disclosure standards; and [2] the publication of prototype climate and general disclosure requirements, developed by the Technical Readiness Working Group (a group formed to undertake preparatory work for the ISSB). For further information, see here.
The G20 communique issued yesterday, following the meeting of finance ministers and central bank governors, has received much attention because of what has been agreed in respect of corporate tax reform: see here (pdf).The communique is also worth noting because of what is said about corporate governance and the G20/OECD Principles of Corporate Governance. To quote directly: "We recognise that a more comprehensive assessment of environmental and climate-related macro-economic risks can help develop innovative solutions to make our economies more sustainable, resilient and inclusive. We recognise the importance of good corporate governance and well functioning capital markets to support the recovery. We look forward to the review of the G20/OECD Principles of Corporate Governance and ask the OECD to report back on progress at our first meeting in 2022". Last December, the Financial Conduct Authority introduced a new disclosure rule requiring commercial companies with a UK premium listing to disclose in their annual report whether they had made disclosures consistent with the TCFD recommendations: see here. Today the FCA announced its intention to extend this disclosure regime to (1) standard listed companies and (2) asset managers, life insurers, and FCA-regulated pension providers - see, respectively, here and here.
The Financial Reporting Council has launched a review to consider how companies and their auditors assess and report on the impact of climate change: see here. As part of the review, the FRC will consider the extent to which companies are reporting in accordance with the Task Force on Climate-related Financial Disclosures framework.
The Ministry for the Environment has published a consultation paper setting out it proposals for a new framework on climate related financial disclosures: see here (pdf). This includes, in the chapter 4, a discussion of directors' legal obligations and climate change. The proposed framework would apply to listed issuers, banks, general insurers, asset owners and asset managers. It would subject them to a mandatory reporting obligation, draws on TCFD Recommendations.
The Financial Reporting Council has published the results of its annual review of corporate reporting: see here (pdf). Published alongside the report is an open letter addressed to audit committee chairs and finance directors: see here (pdf). The FRC is calling for improvements in (a) companies' reporting of forwarding-looking information, (b) the potential impact of emerging risks on future strategy and (c) the carrying value of assets and the recognition of liabilities.The Financial Conduct Authority has published a feedback statement in respect of the discussion paper on climate change and green finance it published a year ago: see here (pdf). The FCA has confirmed that it will, in early 2020, publish a consultation paper in which new disclosure rules are proposed, operating on a 'comply or explain' basis for some issuers, and aligned with TCFD recommendations. The FCA has also stated that it will, in the next few weeks, publish a feedback statement concerning its joint discussion paper with the Financial Reporting Council on effective stewardship.
The Financial Reporting Council has today announced the start of a major project exploring the future of corporate reporting: see here. Nominations for membership of the project advisory group are being sought: see here (pdf). The following themes have been identified for consideration: the information needs of investors and other stakeholders; the purpose of corporate reporting and the annual report; the different forms of corporate communication; the role of financial and non-financial reporting; the role of technology; and the role of assurance.The Environmental Audit Committee has today published its report Greening Finance: embedding sustainability in financial decision making: see here or here (pdf). The conclusions and recommendations are available here. The report calls on the Government to set a deadline for all listed companies and large asset owners to report on climate-related risks and opportunities (in line with the TCFD recommendations) on a comply or explain basis by 2022 (with appropriate changes to the UK Corporate Governance Code and UK Stewardship Code).
At the end of last year the Financial Stability Board set-up a task force on climate-related financial disclosures: see here. The group was given the task of developing recommendations for climate-related disclosure by companies. The group's phase 1 report was published earlier this month: see here (pdf). The report sets out the principles needed for an effective disclosure regime (including, for example, that disclosures are specific, complete and consistent over time) and identifies the objectives for the second phase of the group's work. The objectives include producing recommendations relating to the near, medium and long-term physical and non-physical impacts faced by the financial sector and non-financial companies, in order to further understanding and evaluation of relevant financial risks and opportunities.
