Reporting round-up: FCA to consult on integrating ISSB with disclosure rules

The Financial Conduct Authority (FCA) has set out plans to consult on a series of climate-related disclosures for listed firms in the UK.

In a market bulletin, the regulator said it expected to start consultations in the first half of 2024 on putting into place disclosure rules referencing the first two ISSB standards.

The FCA co-led the work of international regulator group IOSCO on reviewing and endorsing the ISSB standards. IOSCO subsequently endorsed the standards, and called on its members to consider how they may adopt, apply or otherwise be informed by them.

The two standards, which cover general requirements for sustainability-related disclosures, and climate-related disclosures, build on the framework of the TCFD, which some companies are already required to disclose against.

The FCA said it would consult on an appropriate scope and design for the new regime, the impacts it may have on proposed reforms to listing rules and transitional measures. It also expects to consult on moving from a comply or explain to mandatory basis for listed issuers.

The consultation will contain details of the FCA’s supervisory approach. However, the regulator said companies can best prepare by improving reporting in line with existing rules, considering reporting against ISSB on a voluntary basis and engaging with consultations and calls for evidence.

The FCA also said that, alongside consulting on ISSB standards, it would ask for feedback on guidance setting out expectations for transition plan disclosures. The UK’s Transition Plan Taskforce is currently in the process of developing a “gold standard” for transition plans and expects to finalise its sector-neutral disclosure framework in October this year.

Also in the UK, the government recently proposed that large companies should be required to explain the steps they are taking to shore up business resilience on a number of topics, including sustainability and climate change.

The measures, which have been tabled as draft legislation in parliament, will create new corporate reporting requirements for companies with 750 employees or more and an annual turnover of £750 million.

If adopted, companies will be asked to include an annual “resilience statement” within statutory filings which sets out their strategic approach to managing risks, identifies principal risks to their business model and operations, and provides a “directors’ assessment of the company’s prospects over the medium term”.

The proposals are pending debate and approval by the House of Commons and the House of Lords and will come into force from January 2025 if passed.

A spokesperson from WWF UK said: “This initiative is relevant in relation to climate disclosures, and so must align with the government’s approach in other areas (including TCFD), but this legislation is also much broader and the government may not necessarily have climate or nature issues in mind when developing it.”

The UK is separately looking at ways to reduce the overall burden of reporting on firms for non-financial matters. A call for evidence launched in May will consider whether current company size thresholds which determine reporting requirements “remain appropriate”.

In other developments, Norges Bank Investment Management has published its response to the ISSB consultation on enhancing international applicability of the SASB standards.

The Norwegian sovereign wealth fund said it welcomed the objectives of the consultation, noting the role that SASB standards play in the first ISSB standard. Ensuring the standards are internationalised will be particularly helpful to non-US entities, it said.

NBIM said it agreed with the ISSB’s favoured approach, but warned that the body should conduct a more comprehensive review to ensure the standards are fully applicable internationally and consistent with the two ISSB standards.

It also called for clarification on the strategy and timing for turning the SASB standards from guidance into a binding component of the IFRS standards.