Government response on mandatory climate-related reporting by quoted and large private companies and LLPs

The UK government has published draft legislation which will require publicly quoted companies, large private companies and limited liability partnerships to include climate-related disclosures in their strategic reports.

The draft Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021 follow a consultation by BEIS earlier this year (see our blog post here).

The Regulations will apply to:

• UK companies that are currently required to produce a non-financial information statement (i.e. companies with more than 500 employees which are listed, or are banking or insurance companies);
• AIM companies with more than 500 employees; and
• other companies and LLPs which have more than 500 employees and a turnover of more than £500 million.

The Regulations will require entities to disclose climate-related financial information broadly in line with the Task Force on Climate-related Financial Disclosure (TCFD) Recommendations (which cover governance, strategy, risk management, and metrics and targets) and the TCFD Recommended Disclosures. This new requirement will be in addition to the Listing Rule requirement that companies with a premium listing report, for financial periods starting on or after 1 January 2021, against the TCFD Recommendations and Recommended Disclosures on a “comply or explain” basis (see our briefing here). The FCA is also consulting on extending this requirement to companies with a standard listing (see our blog post here).

Subject to parliamentary approval, the Regulations will come into force on 6 April 2022 and will apply to accounting periods starting on or after that date. Our briefing on the original consultation (available here) will be updated in due course to reflect the draft Regulations.