Hayden Morgan<\/a>, a sustainability expert with Pinsent Masons, said the new proposals represented a step-change in regulatory expectations for firms listed in the UK.<\/p>\n\u201cThis announcement is hugely significant UK listed firms and their supply chains,\u201d he explained. \u201cThese proposals were tabled before the general election and have now been published,\u201d <\/p>\n
\u201cDirectors will need to carefully consider their company strategy, and their duty as directors, in response to this. Other than climate-related disclosures, which are set to become mandatory, this consultation builds on the established \u2018comply or explain\u2019 principle for disclosures. <\/p>\n
\u201cWhile this is potentially less stringent than a mandatory approach, it does allow for companies to set out alternative approaches, should that be appropriate, encouraging greater flexibility and proportionality. However, under these proposals directors should determine whether compliance is suitable, agree an alternative if not, and then approve the explanation.<\/p>\n
\u201cAs investors increasingly scrutinise company strategy, governance and consider material risks and opportunities associated with climate and sustainability-related disclosures, there will likely be significant interest in this FCA consultation.\u201d<\/p>\n
The FCA said the new consultation exercise was to ensure sufficient time to consult and engage UK issuers and market participants on the proposals ahead of the UK SRS being finalised, replacing the Taskforce for Climate-Related Disclosures rules following that body\u2019s closure in 2023.<\/p>\n
Under the proposed new rules, listed companies would be required to provide mandatory disclosures based on the UK \u2013 an area the FCA says is already well accomplished by companies. Scope 3 emissions – all indirect emissions that occur in the upstream and downstream activities of a company and now covered by the Greenhouse Gas protocols\u2019 other criteria \u2013 would not require mandatory reporting, and instead would operate on a \u2018comply or explain\u2019 basis to reflect the complexity of cost of doing so.<\/p>\n
The \u2018comply or explain\u2019 approach would also be in effect for wider non-climate sustainability reporting, covering areas such as governance and nature-related issues, with the FCA admitting be a new requirement to many listed companies and may present challenges.<\/p>\n
Rather than a mandated transition plan, the watchdog proposes requiring issuers to include a statement in their annual report, in which they would disclose if they had such a plan and if so where it could be found.\u00a0 Explaining why not would be required for companies which do not have a plan.<\/p>\n
The FCA also proposes requiring companies to disclose if they have received third-party assurance on sustainability disclosures, with an exception for international firms which have their primary listing in other jurisdictions.\u00a0 Instead, those companies would be expected to display transparency of their reporting requirements and standards applicable in their primary home.<\/p>\n
\u201cInvestors have said they value clear, consistent, financially material information about how sustainability risks, and the opportunities they create, could impact company performance and market value,\u201d the FCA said.<\/p>\n
\u201cThey want relevant and robust disclosures for accurate pricing of securities and to maintain trust and integrity in UK markets. We want to strike the right balance between enhancing transparency and maintaining proportionality by proposing a ‘comply or explain’ approach for some of the more challenging or new aspects of reporting.\u201d<\/p>\n
The consultation will run<\/a> until 20 March.<\/p>\n","protected":false},"excerpt":{"rendered":"
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