FCA launches TCFD rule consultation

November 19, 2021

The Financial Conduct Authority (FCA) has published plans for climate-related disclosure rules for listed companies.

As announced by UK chancellor Rishi Sunak at the COP26 conference earlier this month, the rules will ensure listed companies report in line with the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD).

The FCA set out its plan in a bulletin published this week. In it, the regulator set out its expectations and supervisory strategy, as well as a consultation, aimed at different stakeholders including listed companies, their directors and advisers, external auditors, investors, and asset owners.

It follows a consultation in June to extend the application of climate-related disclosure requirements to standard share issuers.

Following the latest consultation, the FCA aims to finalise rules on or after 1 January 2022, with the new disclosure requirements coming into force from January 2023.

The Financial Reporting Council (FRC) will be responsible for ensuring the disclosures are made in company accounts and will adopt a risk-based approach to selecting annual reports and accounts for review. From 2022, reviews of TCFD-aligned disclosures will be embedded into the FRC’s routine reviews of premium listed company annual financial reports, extending to all companies from 2023.

The supervisory strategy also includes regulatory intervention to ensure listed companies comply with the TCFD rules and improve the quality of their disclosures so that they are providing “sufficient, decision-useful climate-related information for investors”, the FCA said

If a listed company’s disclosures do not meet the requirements, the FRC may ask for further information or for the firm to take corrective or clarifying action. Failing this, it will be escalated to the FCA, which said it would act on "potentially false or misleading information" such as the omission of material facts or breaches of the rules governing environmental, social and governance matters.

The regulator added that was prepared to use its “full suite of powers” and sanctions to address non-compliance with the new rules.

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