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FCA sets out expectations for climate-related disclosures by UK listed companies and outlines its supervisory approach

  • United Kingdom
  • Corporate



The Financial Conduct Authority (FCA) has set out its disclosure expectations and supervisory approach for UK listed companies that will be required to make disclosures in line with the Task Force on Climate-related Financial Disclosures (TCFD) requirements.

Premium listed companies will be required to make TCFD-aligned disclosures in their annual reports on a “comply or explain” basis as part of their continuing obligations under the Listing Rules for financial years commencing on or after 1 January 2021 (see our briefing here for further details), so the first annual reports containing such disclosures will be published during 2022. The FCA also intends to finalise the rules for standard listed companies (as discussed in our briefing here) in time for them to apply for financial years commencing on or after 1 January 2022.

 Disclosure expectations

In Primary Market Bulletin 36 (PMB 36), the FCA notes that it has published a draft technical note to assist listed companies, their directors and advisers in making TCFD-aligned disclosures. The draft note assumes that the FCA implements the rules for standard listed companies as set out in the earlier consultation.

In the draft technical note, the FCA:

  • Draws companies’ attention to the Fundamental Principles for Effective Disclosure set out at Section F of the TCFD Annex (Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures).
  • Notes that listed companies that have not made the relevant disclosures (and, as such, are required to explain why they have not done so), should:

(i)           provide full, clear and meaningful explanations for not including such disclosures. The explanations should be written in plain language that is easy to understand and leaves no room for ambiguity; and

(ii)          where the listed company provides details of any steps it is taking or plans to take in the future in order to make the relevant disclosures and the timeframe within which it expects to make them, it should provide sufficient detail so that investors can fully understand the nature of the proposed action.

Guidance to the Listing Rules sets out the limited circumstances in which the FCA expects companies to explain rather than provide the disclosures –where there are transitional challenges in obtaining data or embedding relevant modelling or analytical capabilities.

  • Notes that TCFD disclosures should include company-specific information to support decision-making by investors. So, this should not be boilerplate or generic reporting.
  • Advises companies that although they may seek the views of third parties, including their auditors, it is ultimately for the company, using its knowledge of actual and expected activities, operating environment and exposure to physical and transition risks to ensure that it complies with the TCFD disclosure requirements as set out in the Listing Rules.
  • Reminds companies that disclosures on Environmental, Social and Governance (ESG) matters may be required under other FCA regulatory requirements as set out in Technical Note TN/801.1.

The FCA requests views on the draft technical note. There is no deadline set out to provide comments or any indication of when the FCA intends to finalise the note.

Supervisory approach

In PMB 36, the FCA has also set out its supervisory approach, and how it will take a joint approach to enforcement with the Financial Reporting Council (FRC). Whilst the FCA is responsible for enforcement of the Listing Rules, the FRC will play a significant role in discharging an appropriate supervisory strategy as regards TCFD disclosures pursuant to its statutory remit.  It remains to be seen if the FRC’s role in this area will be extended as part of the long awaited reforms relating to financial reporting and audit but, in the meantime, it appears that the FRC will be working closely with the FCA to identify and act on non-compliance.

The FRC will consider TCFD-aligned disclosures as part of its routine review of annual financial reports. The FRC’s Financial Reporting Lab has already undertaken some work in this area in reviewing voluntary TCFD disclosures, as well as the FRC’s Climate Thematic in 2020, and has recently issued practical guidance for companies on preparing TCFD disclosures.

The FCA and the FRC will also collaborate on targeted ‘deep dive’ thematic work designed to assess how companies have complied with the requirements, identify areas of concern and disseminate examples of best practice to refer to.

The FCA and FRC are also looking to take a joint approach to regulatory intervention. Where the requirements of the Listing Rules are not met, PMB 36 notes that the FRC is likely to request more information as part of its routine review of annual financial reports. The FRC may request corrective action, such as the company undertaking to provide enhanced disclosures. Only if the FRC is unable to reach a satisfactory conclusion through engagement, will the matter be referred to the FCA to take enforcement action. In addition, the FRC will refer any potentially false or misleading disclosures to the FCA which are likely to cause investor harm or may breach other FCA rules relating to ESG matters.

If a listed company fails to make a statement as regards TCFD disclosure as required by the Listing Rules, the FCA will require this to be made via a Regulatory Information Service as soon as possible after discovery. The FCA notes that such non-compliances will be viewed seriously and lead to sanctions where appropriate.

The FCA will also:

  • Work collaboratively with the FRC to review concerns raised by stakeholders about the quality of TCFD-aligned disclosures.
  • Take a comprehensive approach in considering possible breaches of other relevant FCA rules in relation to ESG matters.

The FCA acknowledges that given the nature of developments in the area of ESG and sustainability disclosures, its supervisory strategy will continue to evolve in the coming years.


Whilst there has already been guidance on TCFD disclosures published for listed companies, such as the FRC Lab guidance noted above and the London Stock Exchange guide to climate reporting, this bulletin is interesting in setting out the FCA’s regulatory intention as regards its supervisory approach and approach to enforcement. The approach recognises that whilst some listed companies have historically made TFCD disclosures on a voluntary basis, many listed companies will be doing so for the first time in their 2021 Annual Reports and may find this challenging, and the FCA are keen to work with the FRC to encourage effective and meaningful disclosures and best practice. However, the FCA has made it clear that encouragement will be replaced with enforcement action for companies and directors that do not adapt and comply with the new reporting requirements. What is less clear is the role that the new financial reporting regulator the Audit, Reporting and Governance Authority (ARGA) will play. The Government’s consultation “Restoring trust in audit and corporate governance” proposed a number of new supervisory and enforcement powers for ARGA which are not supported by many businesses who fear increased cost and regulatory burden against the backdrop of the challenges associated with recovering from the pandemic. The indications are that the Government will row back on some of its proposed reforms and we will provide an update when the Government’s long awaited response is published.    

Useful links

Primary Market Bulletin 36: TCFD aligned climate-related disclosure requirements