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TCFD Reporting Updates: FCA Primary Market Bulletin 42

The Financial Conduct Authority (“FCA”) recently published their latest primary market bulletin (the “Bulletin”), which provides an update on the FCA’s ongoing monitoring of climate-related financial disclosures.

The Bulletin builds on the recommendations of a report published by the FCA in July, setting out a review of disclosures by premium listed commercial companies against the recommendations of the Taskforce on Climate-related Financial Disclosures (“TCFD”), which was accompanied by some complementary analysis from the Financial Reporting Council (“FRC”) (see here).

In brief, the Listing Rules require certain UK premium listed companies and standard listed companies[1] to include a statement in their annual financial report setting out whether they have made TCFD-aligned disclosures (and where disclosures have not been made, to explain why not).[2] 

The key points highlighted in the Bulletin are as follows: 

  1. Companies must build capabilities to make relevant disclosures. Suggested steps include “improving internal processes, deepening familiarity with the TCFD’s recommendations, and engaging with investors to understand their disclosure expectations.”
  2. Companies should assess their disclosures against the TCFD’s Guidance for All Sectors and, where relevant, the Supplemental Guidance for the Financial Sector and Non-Financial Groups. The FCA state that “a much lower percentage of companies had made disclosures consistent with the TCFD framework than companies self-reported.” Companies should be mindful of the guidance, and should check whether they have included an appropriate level of detail in their disclosures.
  3. Areas for improvement in forward-looking information. The FCA noted that some companies in the TCFD non-financial groups[3] had not sufficiently considered the potential impacts of transition risk on their business models in their disclosures. For example, some oil and gas companies’ disclosures of their hydrocarbon reserves were based on current conditions, and did not account for evolving climate change policy. 
  4. Climate change in financial statements. The FCA re-emphasised that “where climate-related matters represent material risks and opportunities for the business, they should consider those matters in financial statements and disclose material information”. Where relevant, companies need to join up the dots between their climate disclosures and their financial statement disclosures. 
  5. Net zero commitments and transition planning. The FCA encourages companies to engage with the Transition Plan Taskforce’s (“TPT”) recent guidance when making transition plan disclosures. The FCA has worked closely with the TPT and is supportive of its recommendations and approach. 

The Bulletin also sets out the FCA’s intended next steps in this space. The FCA will continue to monitor listed companies’ compliance with the requirements under the Listing Rules. As part of this, the FCA and FRC plan to conduct “thematic reviews” of disclosures made by in-scope companies in 2023. They will also consult on adapting their disclosure rules to reference the ISSB’s standards, once finalised, along with considering whether to move to a mandatory compliance basis. Finally, the FCA intend to consult on strengthening their disclosure expectations for transition plans, drawing on the TPT’s outputs.

2023 therefore looks set to be a busy year; monitoring developments and, where possible, engaging in consultations and calls for feedback is likely to be even more important than in previous years.

As climate-related disclosures have become more ambitious and market participants’ understanding of those disclosures has become more sophisticated, the potential for accusations of greenwashing (from investors and other stakeholders) has increased. Against this backdrop, the FCA is currently consulting on introducing a general “anti-greenwashing rule” that would apply to all FCA-regulated firms. 2022 saw the beginnings of greenwashing becoming a regulatory matter as well as a reputational risk area; given the FCA’s recent focus, this looks set to continue in 2023.

[1] The requirement for standard listed companies commences for financial years beginning on or after 1 January 2022.

[2] LR 9.8.6R(8) for UK registered companies and LR 9.8.7R for overseas companies. LR 14.3.27R applies to companies with a standard listing of shares and standard listed issuers of global depositary receipts (in each case, other than investment entities or shell companies).

[3] The TCFD has developed supplementary guidance for non-financial industries which are more likely to be financially impacted than others, due to their exposure to climate-related transition and physical risks. These non-financial industries are grouped into the following four areas (referred to as non-financial groups): energy; transportation; materials and buildings; and agriculture, food, and forest products. 



decarbonisation, reporting, risk