Companies Invited to Voluntarily Adopt New Nature-related Financial Disclosure Framework

On 18 September 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) published its final recommendations for nature-related risk management and disclosure. The TNFD recommendations aim to provide companies and financial institutions of all sizes around the world with a risk management and disclosure framework to identify, assess, manage, and — when appropriate — disclose nature-related issues.

Companies would be able to report against this new framework alongside the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB) requirements. The TNFD recommendations draw heavily from the TCFD framework, though they are recontextualised for nature.

The TNFD encourages voluntary market adoption of the TNFD recommendations. Following the example of the TCFD, the TNFD will track voluntary market adoption through an annual status update report beginning in 2024. The ISSB (whose new reporting standards on climate and sustainability will likely be adopted in the UK from 2025) has also listed biodiversity, ecosystems, and ecosystem services amongst the potential priorities for its next two-year work plan. Bearing in mind that climate-related disclosures are expected to become mandatory for UK listed companies in due course, the TNFD recommendations could follow a similar trajectory.

Companies should determine the relative importance of natural capital to their businesses and consider developing a strategy on natural capital to reflect the TNFD recommendations. The TNFD has even published a quick-start guide for adoption of its recommendations. For further details, see our Client Alert.

Key Reports Add Impetus to Capital Markets Reforms

Three major reports published in September 2023 recommend a series of reforms to bolster the UK capital markets:

• “Vision for Economic Growth — a roadmap to prosperity” (published by the City of London) outlines how the financial and professional services sector can, through strategic reforms, help unlock investment to drive economic growth across the UK. Amongst other proposals, the report recommends reforms to unlock billions in private capital from the UK pensions and insurance funds industry.
• “UK capital markets — a new sense of urgency” (published by New Financial) calls for urgent action to address the structural challenges in UK pensions to deliver better investment outcomes for millions of individuals. The recommendations include proposals for the UK to rapidly increase pension contributions from 8% to 12%, the consolidation of pension schemes, and pushing ahead with the Mansion House reforms.
• “Widening retail participation in equity markets” (published by New Financial) measures the levels of retail participation in European equity markets and makes a range of recommendations to increase retail investor engagement (including support for digitisation of the UK’s shareholding framework and removing regulatory barriers).

Regarding the anticipated overhaul of the UK listing regime in 2024, the FCA has indicated that it will publish another consultation paper (with draft rules) near the end of 2023 and may provide a high-level update on the final proposals ahead of the consultation paper’s publication.

FRC Considering Consultation Responses on UK Corporate Governance Code Changes

On 13 September 2023, the Financial Reporting Council’s (FRC’s) consultation on proposed changes to the UK Corporate Governance Code closed (see our briefing from June 2023 for an overview of the proposed changes). The FRC is considering responses with a view to publishing a revised version of the code before the end of 2023 if possible, or early 2024.

The proposals have attracted a variety of views (including detailed responses from the Corporate Governance Institute, the City of London Law Society, and the Institute of Chartered Accountants in England and Wales), so further engagement may be required prior to finalising the changes. Several respondents have raised concerns around the additional reporting and assurance requirements (many of which duplicate requirements in other legislation) that would increase complexity and cost of compliance for listed companies.

Latham US FPI Guide — 2023 Edition

The 2023 update to The Latham FPI Guide: Accessing the US Capital Markets From Outside the United States is now available. This new edition includes recent legal developments and topics relevant to UK companies with a US listing or considering US capital markets transactions.

UK companies listed in the US (including those dual-listed in the US and UK) should note the new rules requiring them to make quarterly filings on share repurchases, track trading by insiders, recover erroneously paid incentive-based compensation in the event of a restatement, and report on cybersecurity risk management and processes.