BEIS: Consultation on mandatory climate-related financial disclosures by publicly quoted companies, large private companies and LLPs
On March 24, 2021, the Department for Business, Energy and Industrial Strategy (BEIS) published a consultation paper setting out proposals to mandate climate-related financial disclosures by publicly quoted companies, large private companies and Limited Liability Partnerships (LLPs).
These proposals build on the expectation set out in the Government’s 2019 Green Finance Strategy, that all listed companies and large asset owners should disclose in line with the Task Force on Climate-related Financial Disclosure (TCFD) recommendations by 2022. They also form part of wider efforts to achieve the Government’s aim of becoming the first G20 country to make climate-related financial disclosures mandatory across the economy, as set out in the HM Treasury-led TCFD Taskforce’s Interim Report and accompanying Roadmap published in November 2020.
In summary, the proposals set out in the consultation paper are as follows:
The following entities would be within scope for the disclosure requirements proposed:
- All UK companies that are currently required to produce a non-financial information statement, being UK companies that have more than 500 employees and have transferable securities admitted to trading on a UK regulated market, banking companies or insurance companies (Relevant Public Interest Entities (PIEs));
- UK-registered companies with securities admitted to AIM with more than 500 employees;
- UK-registered companies which are not included in the categories above, which have more than 500 employees and a turnover of more than £500m; and
- LLPs which have more than 500 employees and a turnover of more than £500m.
The changes would be implemented through a Statutory Instrument, using powers under the Companies Act 2006, and powers under the Limited Liability Partnerships Act 2000.
Location of disclosures
Companies will be required to report climate-related financial information in the non-financial information statement which forms part of the Strategic Report. LLPs will be required to report climate-related financial information in either the non-financial information statement which forms part of their Strategic Report or the Energy and Carbon Report which forms part of their Annual Report.
Disclosure requirements on companies and LLPs
Companies and LLPs would be required to disclose climate-related financial information in line with the four overarching pillars of the TCFD recommendations on a mandatory basis (Governance, Strategy, Risk Management, Metrics & Targets). The consultation paper notes that this approach will provide the structure required to deliver comparable and decision-useful information, whilst still allowing an appropriate level of flexibility as to the detail of such disclosures and is consistent with the existing requirements in the Strategic Report. BEIS states that the regulations will not require or prescribe the disclosure of climate-related financial information in line with the 11 more detailed TCFD recommendations, as it believes that some of the recommendations are at a level of granularity that would be inconsistent with current legislative requirements in the Strategic Report. However, it notes that companies with a premium listing are now required by the Listing Rules to report against those 11 recommendations on a comply or explain basis in any event.
Regulations are to be made by the end of 2021 and they would come into force on April 6, 2022, and be applicable for accounting periods starting on or after that date.
Non-binding Q&A will be produced to support companies in their application of these requirements.
Responses to the consultation are requested by May 5, 2021.
(BEIS, Consultation on mandatory climate-related financial disclosures by publicly quoted companies, large private companies and LLPs, 24.03.2021)
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 No. 375
On March 24, 2021, the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 were laid before Parliament and come into force on March 26, 2021. They make provision to further extend the duration of some of the temporary measures introduced by the Corporate Insolvency and Governance Act 2020 (CIGA) beyond their current expiration dates.
The following is provided for:
- Restrictions on the use of statutory demands and winding up petitions are being extended from their current expiry date of March 31, 2021 to June 30, 2021.
- The modifications to moratorium provisions and temporary moratorium rules are being extended from their current expiry date of March 30, 2021 to September 30, 2021.
- The small supplier exemption from termination clause provisions is being extended from its current expiry date of March 30, 2021 to June 30, 2021.
- Provisions suspending liability for wrongful trading in the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 (S.I. 2020/1349), made under CIGA, are being extended from their current expiry date of April 30, 2021 to June 30, 2021.
(The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 No. 375, 24.03.2021)
ICAEW: Developing a meaningful Audit and Assurance Policy
On March 22, 2021, following publication of the Government’s White Paper on audit and corporate governance reform, which proposes sweeping changes for auditors and company directors, the ICAEW published a report setting out a number of recommendations for companies that may be required to produce and publish an Audit and Assurance Policy.
The White Paper draws on the Brydon Review of the quality and effectiveness of audit and includes a proposal to introduce a statutory requirement on public interest entities to publish an annual Audit and Assurance Policy that describes the company’s approach to seeking assurance of its reported information over the next three years.
The ICAEW report urges companies to “seize the moment” and develop such a Policy but, as part of the report, the ICAEW examines the challenges companies may face when creating a meaningful Audit and Assurance Policy and outlines how they might be overcome. Its nine recommendations are aimed at helping an Audit and Assurance Policy fulfil its potential.
(ICAEW: Developing a meaningful Audit and Assurance Policy, 22.03.2021)
Companies House: Automatic filing extensions granted by the Corporate Insolvency and Governance Act due to come to an end
On March 25, 2021 Companies House announced that the automatic extensions granted by the Corporate Insolvency and Governance Act 2020 (CIGA) will come to an end for filing deadlines that fall after April 5, 2021.
CIGA granted automatic extensions for filing deadlines between June 27, 2020 and April 5, 2021 to relieve the burden on companies during the COVID-19 pandemic and allow them to focus their efforts on continuing to operate. Automatic extensions were granted for accounts, confirmation statements, event-driven filings and mortgage charges.
For mortgage charges created up to and including April 4, 2021, those with an interest in the charge will continue to receive an automatic extension of 10 additional days to file the particulars of a charge (31 days). Mortgage charges created after that date will not receive an automatic extension, and those with an interest in the charge will need to file within 21 days as normal. The 21-day period starts the day after the charge was created.
The announcement reminds companies with accounts filing deadlines after April 5, 2021 that they can still apply for a three month filing extension if they are eligible to do so and cite issues around COVID-19 in their application.
(Companies House, Automatic filing extensions granted by the Corporate Insolvency and Governance Act due to come to an end, 25.03.2021)