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
APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
FSB Sets Out Good Practices for Crisis Management Groups
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
APRA Penalizes Heritage Bank for Incorrect Reporting of Capital
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
OSFI Releases Annual Report 2021-2022
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
OSFI Updates Timeline for Implementation of Certain Basel Rules
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
APRA Finalizes Capital Adequacy Standards for Banks
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.
