CP20/3: Climate-related Financial Disclosures, ESG and the impact on your Annual Report or Prospectus

 

As the FCA noted back in March when it launched its CP20/3 consultation, “climate change threatens to have a significant and complex impact on most, if not all, listed companies. Climate change … may impact the value of companies’ assets and prospective profits directly or indirectly because of changes to how their businesses are operated. Increasingly, investors want to commit their money to companies and projects that will support the transition to a low-carbon economy.”

While consultation has now closed and stakeholder engagement is in process, it’s widely anticipated that the FCA will introduce a new Listing Rule for premium-listed companies requiring them to state whether they comply with the recommendations of the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (TCFD).

What impact will this have on Corporate Reporting and the listing of any new Prospectus?

Four areas are likely to see the most impact of this new rule: governance, strategy, risk management and metrics & targets.

For companies who already adhere to Best Practice Corporate Reporting, this means some minor adjustments to the relevant Strategic Report and Governance Report. For others, it may mean a more radical change in their approach to environmental, social and governance (ESG) reporting.

The likelihood is that additional text outlining the financial risks companies face from climate change will suffice for disclosure, particularly in the Risk section of the Strategic Report, detailing the change in risk profile and the financial effects of that risk during the year. It may, however, also be desirable for some issuers to address or include APIs or other performance-related indicators to highlight steps undertaken during the year, calling on a more graphical or even infographical approach to disclosure. Clearly while this latter approach is ideal for Corporate Reporting, any Capital Markets requirements to address the Listing Rule in a Prospectus would need a different approach.

Either way, at Black&Callow we’re committed to ensuring Best Practice Reporting for all clients, with detailed consideration on how to best comply with regulations. If you’d like more information on how we can help your Corporate Reporting or Capital Markets requirements, please contact Tim Black on +44 (0)20 3794 1736 or via [email protected].