In March 2020, the UK Financial Conduct Authority (the "FCA") published consultation paper CP 20/3 concerning proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations. The consultation period is currently set to close on 1 October 2020. Among the proposed changes is a new Listing Rule which would require commercial companies with a UK premium listing to state whether they comply with the Task Force on Climate-related Financial Disclosures ("TCFD") recommendations and to explain any non-compliance.
In light of the increasing focus on not only climate-related disclosures but also environmental and social ("E&S") disclosures generally, White & Case conducted a survey of E&S disclosures in the annual reports of the top 50 companies by revenue1 (based on revenue for the financial years ended in 2018) in the FTSE 100. Our survey focused on 16 substantive and presentational categories2 of common E&S related disclosures in annual reports published in respect of financial years ended in 2018 and 2019. In addition, we reviewed the prospectuses for the 20 largest announced premium-listed London IPOs by market capitalisation3 over the last two years. This part of the survey focused on 10 substantive categories4 of E&S disclosures.
Based on our survey, in 2019, 35 of the 50 companies surveyed (or 70%) included some form of disclosure on adherence or intended adherence to the TCFD recommendations, and 17 companies (or 34%) increased the scope of their TCFD disclosures from 2018 to 2019. Overall, if we were to extrapolate the findings from the survey to the wider set of all commercial companies with a premium listing, the new Listing Rule requirement proposed by the FCA would not seem a significant burden for most such companies given their existing disclosure regimes. What would be most important would be to highlight the specific ways in which they are non-compliant with the TCFD recommendations and how they are measuring compliance generally.
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1 The companies considered in this survey in respect of annual reports were Anglo American plc, Associated British Foods plc, AstraZeneca plc, Aviva plc, BAE Systems plc, Barclays plc, BHP Group plc, BP plc, British American Tobacco plc, BT Group plc, Bunzl plc, Carnival plc, Centrica plc, Compass Group plc, CRH plc, DCC plc, Diageo plc, DS Smith plc, EVRAZ plc, Ferguson plc, GlaxoSmithKline plc, Glencore plc, HSBC Holdings plc, International Consolidated Airlines Group S.A., Imperial Brands plc, J. Sainsbury plc, Johnson Matthey plc, Kingfisher plc, Lloyds Banking Group plc, Marks & Spencer Group plc, Melrose Industries plc, Mondi plc, National Grid plc, Prudential plc, Reckitt Benckiser Group plc, RELX plc, Rio Tinto plc, Rolls-Royce Holdings plc, Royal Dutch Shell plc, RSA Insurance Group plc, Smurfit Kappa Group plc, SSE plc, Standard Chartered plc, Tesco plc, The Royal Bank of Scotland Group plc, TUI AG, Unilever plc, Vodafone Group plc, WM Morrison Supermarkets plc and WPP plc. Of these 50 companies, at the time of publication of this report, two companies, DS Smith plc and Smurfit Kappa Group plc, also qualified for the Green Economy Mark from the London Stock Exchange, which was established in 2019 and indicates the issuer meets certain criteria for green revenues. To date, nearly 50 LSE Main Market issuers have qualified for this mark.
2 The categories analysed for the annual reports comprised: (1) environmental matters; (2) human capital management; (3) corporate culture; (4) social impact and community; (5) supply chain management; (6) ethical business practices; (7) political contribution policies; (8) appearance of E&S disclosure in letters from the chairman or CEO; (9) prominence of E&S disclosures near the front of the annual report; (10) board oversight of E&S issues; (11) E&S qualifications of directors; (12) E&S issues in shareholder engagement; (13) E&S goals; (14) awards for E&S matters; (15) reference to a sustainability website or report; and (16) adherence to and disclosure around the recommendations promulgated by the Task Force on Climate-related Financial Disclosures ("TCFD").
3 The prospectuses reviewed in this survey in respect of IPOs were Airtel Africa plc, AJ Bell plc, Amigo Holdings plc, ASA International Group plc, Aston Martin Lagonda Global Holdings plc, Avast plc, DNEG plc (postponed), DWF Group plc, Energean Oil & Gas plc, Finablr plc, Funding Circle Holdings Limited, Helios Towers plc, IntegraFin Holdings plc, Network International Holdings Limited, Quilter plc, Reassure Group plc (postponed), Resolute Mining Limited, Trainline plc, Vivo Energy plc and Watches of Switzerland Group plc.
4 The categories analysed for the IPO prospectuses comprised: (1) environmental matters; (2) human capital management; (3) corporate culture; (4) social impact and community; (5) supply chain management; (6) ethical business practices; (7) E&S qualifications of directors; (8) E&S goals; (9) awards for E&S matters; and (10) adherence to and disclosure around the TCFD recommendations.
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