HMT Issues Proposal to Mandate Climate-Related Financial Disclosures
HM Treasury, or HMT, is seeking views on the proposal to mandate climate-related financial disclosures from publicly quoted companies, large private companies, and Limited Liability Partnerships (LLPs). The proposal builds on the expectation set out in the 2019 Green Finance Strategy of the government; the said expectation is that all listed companies and large asset owners should, by 2022, make disclosures in line with the Task Force on Climate-related Financial Disclosure (TCFD) recommendations. This comment period for this proposal ends on May 05, 2021.
HM Treasury proposes to keep the following entities in scope of the disclosure requirements:
- All UK companies that are required to produce a non-financial information statement (that is, the UK companies that have more than 500 employees and have transferable securities admitted to trading on a UK regulated market), banking companies, or insurance companies (Relevant Public Interest Entities)
- UK-registered companies with securities admitted to AIM that have more than 500 employees
- UK-registered companies that are not included in the categories above, that have more than 500 employees, and that have a turnover of more than GBP 500 million
- LLPs that have more than 500 employees and a turnover of more than GBP 500 million
Other key proposals in the consultation include the following:
- Provisions requiring companies and LLPs to report climate-related financial information will be implemented through secondary legislation. The proposed application in the case of companies and LLPs will be via a Statutory Instrument, using the Secretary of State’s powers under the Companies Act 2006.
- Requirement for companies to report climate-related financial information in the non-financial information statement, which forms part of the Strategic Report. LLPs will be required to report climate-related financial information in either the non-financial information statement which forms part of their Strategic Report or the Energy and Carbon Report which forms part of their Annual Report.
- Requirement for companies and LLPs to disclose climate-related financial information in line with the four overarching pillars of the TCFD recommendations on a mandatory basis. These principles are related to governance, strategy, risk management, and metrics and targets.
Subject to a consultation and Parliamentary approval, the Statutory Instrument will be made in 2021 and the rules would come into force on the Common Commencement Date of April 06, 2022. For accounting periods starting on or after April 06, 2022, entities will need to be compliant with these regulations. Non-binding questions and answers will be produced to support companies in the application of these requirements. The proposals have been developed in cooperation wit of the UK to become the first G20 country to make TCFD-aligned disclosures mandatory across the economy, as set out by the Chancellor on November 09, 2020.
Related Links
Comment Due Date: May 05, 2021
Keywords: Europe, UK, Banking, Insurance, Securities, Climate Change Risk, Disclosures, TCFD, ESG, Sustainable Finance, Corporates, HM Treasury
Previous Article
ESRB Announces Updates on Macro-Prudential Measures in March 2021Related Articles
HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
EBA Guide to Monitor Threshold for Intermediate Parent Undertakings
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
PRA Finalizes Approach to Supervision of International Banks
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
FCA Issues PS21/9 on Implementation of Investment Firms Regime
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
EBA Proposes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
IOSCO Proposes Recommendations on ESG Ratings and Data Providers
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
ESMA Group Issues Recommendations on RFR Switch in Interdealer Market
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
ECB Study Assesses Impact of Basel III Finalization Package
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
PRA Updates Remuneration Policy Statement Templates and Tables
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.
