Our previous Client Alert of 5 November 2021 discussed the UK government's policy paper "Greening Finance: A Roadmap to Sustainable Investing" (the "Roadmap"). The Financial Conduct Authority (FCA), on 17 December 2021, released two policy papers, delivering on the first stage of the Roadmap by extending the scope of the Sustainability Disclosure Requirements (SDR) framework through new mandatory Taskforce on Climate-related Financial Disclosures (TCFD)-aligned disclosures to apply to more market participants. The FCA expects these new measures to meet its objectives of protecting market integrity, protecting consumers and encouraging competition by further increasing the quantity, quality and availability of climate-related information upon which consumers can base investment decisions – and to help facilitate a smooth transition to a net zero economy by 2050.

Key Takeaways

  • All issuers of standard-listed shares and standard-listed global depositary receipts (GDRs) representing equity shares are now required under the Listing Rules to make TCFD-aligned disclosures on a "comply or explain" basis. This rule was previously only applicable to premium-listed companies.
  • "Asset managers" and "asset owners" with more than £50 billion and £25 billion of assets under management (AUM) respectively are now mandated to make entity- and product-level disclosures. This will extend to asset managers and asset owners with more than £5 billion in AUM in 2023.
  • Asset manager and owner disclosures relate to the year beginning 1 January 2022, and must be made no later than 30 June 2023. Standard-listed company disclosures relate to accounting periods beginning on or after 1 January 2022, and are expected to be made in early 2023.
  • The landscape is still shifting: clients should be aware of ongoing discussions surrounding mandatory disclosures under the Companies Act applicable to large private companies and LLPs, mandatory disclosures for debt securities and issuers, and a sustainability labelling regime for financial products.

Standard-Listed Companies

FCA Policy Statement PS21/23 sets out the new Listing Rules and guidance for company TCFD-aligned disclosures, which effectively mirror the current rules applicable to premium-listed companies. An in-scope company must:

  • include a statement in its annual financial report setting out whether it has made TCFD-aligned disclosures (and where in the report they can be found); or
  • if it has not made any such disclosures, explain why not and set out the steps taken or planned to be taken to enable consistent disclosures in future; or
  • if it has made such disclosures in a document other than its annual financial report, explain why, and where they can be found.

These new requirements apply to all issuers of standard-listed shares and Global Depositary Receipts representing equity shares. It should be noted that shell companies and special purpose acquisition companies (SPACs) are not within the scope of these rules until they complete an acquisition, while investment entities are subject to the regime discussed below.

These disclosures will relate to accounting periods beginning on or after 1 January 2022 (and as such must be made when the annual financial reports for these periods are released, in early 2023).

Listed companies headquartered or operating in countries which have made commitments to a net zero economy are encouraged by the Policy Statement to assess the extent to which they have considered that country's commitment in developing and disclosing their transition plans. Such companies are also encouraged to (as appropriate) consider the Sustainability Accounting Standards Board metrics for their sector when making disclosures against the TCFD recommendations.

The FCA will request that listed companies which fail to make the required statement in their annual financial report publish such a statement via a Regulatory Information Service. Non-compliance may be met with any of the powers and sanctions available to the FCA, as with any breach of the Listing Rules.

Asset Managers and Owners

FCA Policy Statement PS21/24 introduces a new ESG Sourcebook to the FCA Handbook, formalizing the FCA's rules and guidance applicable to:

  • Asset Managers: investment portfolio managers, UK Undertakings for Collective Investment in Transferable Securities management companies, full-scope UK Alternative Investment Fund Managers (AIFMs), and small authorized UK AIFMs; and
  • Asset Owners: life insurers in relation to insurance-based investment or defined contribution pension products, and self-invested personal pension operators which provide a ready-made selection of investments

which have £50 billion in AUM and £25 billion in AUM respectively (together, "Firms"). This will extend to asset managers and asset owners with more than £5 billion in AUM in 2023.

A Firm must make annual TCFD-aligned disclosures on an entity- and product-level in a prominent place on its main website. Specifically:

  • Entity-Level: how the Firm takes climate-related risks and opportunities into account when managing or administering investments on behalf of clients and consumers; and
  • Product-Level: a set of disclosures and core climate-related metrics on its products and portfolios, identifying scopes 1, 2 and 3 greenhouse gas emissions, total carbon emissions and footprint, and weighted average carbon intensity. Product-level disclosures may also be demanded by certain clients; the Firm must produce these within a reasonable time.

These disclosures relate to the year beginning 1 January 2022, and must be made no later than 30 June 2023.

Rules under the FCA Handbook represent binding obligations on Firms; contravention of the PS21/24 TCFD-aligned disclosure rules may therefore attract enforcement action from the FCA.


Firms and companies which are now within the scope of the SDR Framework should now begin exploring how to implement the new disclosure regimes before the deadline for disclosure in 2023. For listed companies in particular, PS21/23 directs them to the TCFD's suite of guidance (and accompanying Annex) released in October 2021, while PS21/24 likewise incorporates and references several documents including the Guidance on Risk Management Integration and Disclosure.

While many in-scope Firms are likely to be making voluntary TCFD-aligned disclosures already, the FCA considers that the new product labelling regime will be implemented "on top of" product- and entity-level disclosures and, as such, familiarity and best practice within the new disclosure regime will stand clients in good stead as the labelling regime is implemented.

What to Watch

  • In our previous Client Alert, we mentioned that discussions were beginning regarding a sustainable investment labelling regime for investment products. Responses to the FCA's discussion paper have now closed, and the proposed rules should be published in Q2 2022.
  • Regulations are being drafted to amend the Companies Act to mandate climate-related financial disclosures for listed, AIM-quoted and large private companies. Similar rules will likely follow for LLPs.
  • PS21/23 declined to extend the Listing Rules regime for mandated disclosures to debt securities, but the FCA has committed to engage with stakeholders to gather information with a view to consulting on a tailored regime at a later stage. A Feedback Statement on ESG integration in UK capital markets is also to be published in H1 2022.

James Quirke, London Trainee Solicitor, contributed to the drafting of this alert.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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