Immediate Actions to Consider to Prepare for ISSB Standards and Transition Plan Reporting

On 10 August 2023, the FCA published Primary Market Bulletin 45, which describes its process for developing its policy position in relation to the new ISSB standards and developing climate-related transition plan guidance for listed companies.

• ISSB Standards — The FCA signals its process concerning the potential implementation of disclosure rules referencing the new standards released by the International Sustainability Standards Board (ISSB) in June 2023. If implemented, these standards would build on and eventually replace the Task Force on Climate-related Financial Disclosures (TCFD) disclosure framework. The ISSB standards are consistent with the TCFD framework (including the four core recommendations and 11 recommended disclosures of the TCFD). The differences primarily relate to guidance and the extent of detailed disclosures required, and the requirement to disclose information on general sustainability risks and opportunities, beyond climate.

  The FCA therefore advises listed companies to continue to improve their reporting in line with the existing TCFD framework, and at the same time engage early with the implementation process for these new standards and consider reporting on a voluntary basis.

• Enhanced Transition Plan Guidance — Alongside its consultation on the ISSB standards, the FCA will also consult on guidance regarding listed companies’ climate-related transition plan disclosures. The guidance will be developed with reference to the final disclosure framework which the UK government’s Transition Plan Taskforce (TPT) will likely publish in October 2023.

  The guidance is expected to provide additional clarity on what a good-practice transition plan should cover. In the meantime, listed companies should familiarise themselves with the TPT disclosure framework and guidance (once published), which is designed to align with the ISSB standards, and consider reporting on a voluntary basis.

The FCA expects to consult on its policies around the ISSB standards and transition plans in H1 2024. If requirements aligned with the ISSB standards are implemented, then such standards could potentially apply to accounting periods beginning on or after 1 January 2025. Listed companies are encouraged to respond to the FRC’s call for evidence regarding the UK implementation process for the new standards, as well as the FCA’s consultation (once published).

For further details on the ISSB standards, see this Latham Client Alert.

FCA Warns Overseas Companies That Fail to Appoint FRC-Registered Auditors

In Primary Market Bulletin 45, the FCA reminded listed companies that a non-UK incorporated company which is admitted to a UK regulated market must ensure that its auditor is on the FRC’s register. Failure to publish financial statements with an audit report provided by an FRC-registered, third-country auditor would be a breach of Disclosure Guidance and Transparency Rule (DTR) 4.1.7R. Companies are also asked to consider whether such breaches would give rise to a disclosure obligation under the Market Abuse Regulation.

In such instances, the FCA flags that it would temporarily suspend the company’s listing until it complied with the requirements.

Looking Ahead to Q4

Below is a brief horizon scan on key regulatory developments affecting listed companies (based on expected dates provided by the government and regulators):

• Autumn 2023 — FCA to issue a further consultation with proposed specific revisions to the UK listing regime
• Q3/Q4 2023 — FCA to publish feedback following its engagement process on prospectus regime reforms
• December 2023 — Interim report by Accelerated Settlement Taskforce (exploring the potential for faster settlement of financial trades in the UK) is expected
• By end of 2023:
  • HM Treasury to make legislation on the new Public Offers and Admissions to Trading Regime
  • Government to consult on UK Green Taxonomy
  • ESG Data and Ratings Code of Conduct Working Group to finalise Voluntary Code of Conduct for ESG data and ratings providers