In addition to the fund level sustainability reporting requirements (see section 5 above), there have been many developments in relation to corporate sustainability reporting, which many infrastructure operators will be getting to grips with or should have on their radar.

Non-financial reporting: where are we now?

Non-financial reporting obligations were first introduced in the UK in 2017 to implement the EU's Non-Financial Reporting Directive 2014/95/EU ("NFRD"). As a result, certain organisations (including listed entities with over 500 employees) have been required for several years to include a non-financial information statement in their strategic report. This statement must contain information on the impact of the business on environmental matters, employee relations, social matters, respect for human rights and anti-bribery and corruption.

In the EU, these obligations have now been subsumed into, and expanded under, the new Corporate Social Reporting Directive ("CSRD"). CSRD will impact companies with significant EU business, requiring a detailed report on the material impacts of the business, as well as risks and opportunities to and for the business, across the spectrum of ESG topics. Any entity covered by CSRD additionally needs to prepare a report under the EU Taxonomy Regulation. By contrast, UK companies must continue to comply with the NFRD requirements under UK law (as well as complying with CSRD if they fall within its scope).

The UK is also currently considering potential options for refreshing and rationalising current reporting requirements to ensure that its non-financial reporting framework is fit for purpose.

Financial reporting: where are we now?

In the UK, disclosing climate-related financial information in line with the recommendations of the Taskforce on Climate-related Financial Disclosures ("TCFD") is currently required for:

  • Official List companies;
  • certain FCA-regulated entities including asset managers;
  • AIM companies with more than 500 employees; and
  • companies or LLPs with more than 500 employees and a turnover of over £500 million.

Prepare for new reporting standards!

Just as we get to grips with the TCFD reporting framework, replacement reporting standards are already on the horizon. The UK has recently supported the adoption by the International Sustainability Standards Board ("ISSB") of its first two sustainability standards (IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and S2 Climate-related Disclosures) and is already planning for integration of these Standards into UK law, with national modifications as necessary. To be known as "Sustainability Disclosure Standards", they will be mandatory for reporting by listed companies and certain FCA-regulated entities, potentially as soon as 2025. In relation to listed companies, the FCA has already published steps that companies should be considering ahead of 1 January 2025, when these standards will start to apply.

While the requirements in IFRS S2 are broadly consistent with the TCFD core recommendations and recommended disclosures, there are some differences, which are summarised by the IFRS Foundation in this comparison. Companies that apply the ISSB Standards will meet the TCFD recommendations and so do not need to apply the TCFD recommendations in addition to the ISSB Standards. For further information on the ISSB Standards and other developments in sustainability reporting in the EU and UK, see our briefing.

UK Energy Savings Opportunity Scheme (ESOS)

Following Brexit, the UK has retained legislation implementing Article 8 of the EU Energy Efficiency Directive, which is now coming up to its third reporting phase ("Phase 3"). Broadly, ESOS applies to "large undertakings" i.e. any UK company that either employs 250 or more people, or has an annual turnover in excess of £44 million and an annual balance sheet total in excess of £38 million. It requires them to measure and audit their energy use and report them to the UK's Environment Agency. The original reporting deadline of 5 December 2023 has now been extended to 5 June 2024 to allow the Government time to pass legislation making changes to the scheme.

Last year the Government announced several changes to ESOS, including the reduction of the 10% de minimis exemption to "up to 5%", the addition of an energy intensity metric in ESOS reports and a requirement for participants to set a target or action plan following the Phase 3 compliance deadline, which they will be required to report against for Phase 4. See our briefing for further details. The Environment Agency has also recently indicated that the Government will consider broadening the scope of ESOS to medium-sized companies in Phase 4 (this was considered but rejected for Phase 3).

Keeping up to date with ESG developments

We have recently published a full update to our interactive ESG timeline. Please refer to this for further details of recent and expected UK and EU legal and regulatory developments relating to ESG and wider sustainable business topics, many of which will be relevant to the infrastructure sector (at fund and corporate level). Please also refer to our ESG and Impact webpage for further updates and thought-leadership pieces on a wide range of relevant ESG topics.

To view the full article, click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.