US: Extended SEC filing deadline relief covers Form 20-F filers
The SEC issued an order that provides a publicly traded company 45 more days to file disclosure reports
Interviewed by Susan Ghaiwal and published in Lexis®PSL in July 2019
On July 2, 2019, the UK Government published its policy paper on the Green Finance Strategy – a strategy that “recognises the role of the financial sector in delivering global and domestic climate and environmental objectives.” Imogen Garner, partner in the Financial Services team, Glenn Hall, partner and head of the Government Relations and Public Policy team, and Rosa Mottershead, counsel in the Energy, Infrastructure and Natural Resources team, at Norton Rose Fulbright discuss, amongst other things, the opportunities created by the strategy, the implications for the financial services/banking and finance sectors, and mandatory requirements that businesses must consider.
Glenn: Prior to the launch of the Green Finance Strategy, the Government had led various initiatives in the area of climate and environmental issues, notably the Climate Change Act 2008, Clean Growth Strategy, 25 Year Environmental Plan, and the National Adaptation Programme. In parallel, the UK has been contributing to the development of the EU Sustainable Finance Action Plan, which contains several legislative measures designed to promote the provision of finance to investment taking into account environmental, social and governance (ESG) considerations.
Rosa: We should all be aware of the threat of climate change. To meet this threat, governments globally need to pick up the pace of change, and direct investment towards cleaner, more resilient economic growth. This will involve the reallocation of significant amounts of capital towards green investment. The Government recognises the significant commercial opportunity that the green finance sector presents for the UK financial sector and the Green Finance Strategy is a step towards realising this opportunity, as well as seeking to mitigate this threat.
Glenn: The Government considers the Green Finance Strategy as integral to its plans to consolidate the UK’s position as a global leader in this area and capture commercial opportunities as this important sector continues to grow. The Green Finance Strategy is broken down into three elements, referred to as (1) greening finance; (2) financing green; and (3) capturing the opportunity. The ultimate aim of the strategy is to stimulate investment towards the types of activities and developments that will protect the UK economy from climate-related risk, and ensure the economy remains robust in the face of these risks. The three elements work together to create incentives for financial institutions to move towards more resilient economic growth, to reduce their exposure to climate-related risks and to future-proof the economy by placing the UK at the centre of the ‘green economy’.
Imogen: In relation to “greening finance”, the aim is to ensure that the risks and opportunities from climate and environmental factors are integrated into financial decision-making and that markets for green products are sufficiently robust. The Government aims to establish a shared understanding, clarify roles and responsibilities, foster transparency and embed a long-term approach, and build robust and consistent green financial market frameworks. Of particular significance, the Government sets out its expectation for all listed companies and large asset owners to disclose their exposure to climate-related risk in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations by 2022. In addition, the Government intends to clarify the responsibilities of the Prudential Regulation Authority (PRA), the Financial Conduct Authority (FCA) and the Financial Policy Committee to have regard to the Paris Agreement when carrying out their duties.
Glenn: “Financing green”, describes the Government’s plans to mobilise and accelerate flows of private finance into key clean growth and environmental sectors in the UK and internationally. The Government’s strategy will establish robust, long-term policy frameworks, improve access to finance for green investment, address market barriers and build capability, and develop innovative approaches and new ways of working. Policies currently cover transport, power, housing, land management and energy use, and the Government intends to develop further measures in these areas, such as to mobilise green finance for home energy efficiency and use the forthcoming Environment Bill to place the 25 Year Environmental Plan on a statutory footing, which will include the creation of a new Office for Environmental Protection. Various public funds will be expanded to leverage private capital for clean energy and financing natural habitats. The UK is also working with the governments of China, Brazil and Mexico to develop green finance markets, through the UK PACT (Partnering for Accelerated Climate Transitions) programme, developed by the Department for Business, Energy and Industrial Strategy.
Rosa: “Capturing the opportunity” part of the strategy seeks to ensure that the UK continues to take advantage of the commercial opportunities arising from green finance, building on the experience of developing green innovations such as Yieldcos, green bonds, green loans and ESG exchange-traded funds. The Government aims to consolidate the UK’s position as a global hub for green finance, position the UK as a leader in green innovation and data and analytics, and build skills and capabilities on green finance. This will help the UK economy be resilient in the face of climate-related risk. In order to implement this part of its strategy, the Government has launched the Green Finance Institute (GFI) to develop innovative approaches to green finance through public and private sector collaboration. Other measures include launching a Home Finance Fund (making £5 million available for green mortgages) as well as a Green Finance Educational Charter to build the industry’s competencies. The UK is likely to see some competition from other financial centres looking to lead in this area, so Government support will be crucial to ensure the UK maintains its international status in financial leadership as we transition to a greener economy.
Rosa: In broad terms, our expectation is that the market for green services and products (including green bonds and green loans) will continue to grow. We’re already seeing the market for low carbon financial services growing at a rapid rate and the Green Finance Strategy aims to position the UK financial sector at the forefront of this market. It is estimated that the potential global market size for low carbon financial services could reach £280 billion per year in 2030 and £460 billion in 2050. Increased investor demand for green and climate-resilient investments will support the development of new innovative products and services, presenting a significant commercial opportunity for the UK financial sector. The Government intends to support private sector innovation by creating effective regulatory and policy frameworks to deal with market failures and promote consistency, clarity and best practice, as well as by developing policies to promote the adoption and mainstreaming of green finance products and services. This will help establish benchmarking of green financial products, allowing investors to evaluate different products and act accordingly.
The Government currently allocates substantial public resources to fund investment in clean energy and natural capital growth both nationally and internationally, and we expect funding models such as public-private partnerships, export credit and political risk products will be used to leverage private sector capital for green projects. The Government’s portfolio of blended, innovative funds will be expanded to increase access to finance for promising green technologies and investment models. The alignment of the UK’s Official Development Assistance (the overseas aid budget) with the objectives of the Paris Agreement is expected to boost the UK’s investment into global initiatives focused on climate change mitigation, adaptation and natural climate solutions. UK businesses will be well placed to advise and assist on such initiatives.
Imogen: There is a potential for mandatory reporting obligations on climate change risk to become applicable to businesses, and in particular corporate issuers. The Government’s expectation for all listed companies and large asset owners to disclose in line with the TCFD recommendations by 2022 may have significant consequences. The TCFD recommendations have the status of ‘soft law’ international guidance which is not legally binding on businesses. As part of his speech announcing the Green Finance Strategy, City Minister John Glen MP warned businesses that, while the Government does not intend to resort to legislation straight away, it expects far greater uptake of the TCFD recommendations in the coming months. In order to consider the appropriateness of mandatory reporting, the Government intends to establish a joint taskforce with UK regulators to examine the most effective way to approach climate-related disclosure. The GFI will provide ongoing guidance from the financial sector to inform the Government’s strategy and so will be an important body for the industry to engage with.
Imogen: Financial sector firms will be expected to integrate climate and environmental factors into mainstream financial decision-making across all sectors and asset classes. Ultimately, firms will need to take strategic, board-level decisions as to how they intend to manage climate change as a financial risk. This was reflected by the recent joint declaration on climate change by the FCA, Financial Reporting Council, PRA and Pensions Regulator, which advised companies to consider the likely consequences of climate change on their business decisions, in addition to meeting their responsibility to consider their impact on the environment.
The approaches of financial sector firms must be built upon transparent and decision-useful climate-related information and a long-term approach, so there will be increased emphasis on disclosure. Compliance with the TCFD recommendations by companies is therefore vital to ensuring that financial sector firms are able to effectively evaluate and manage climate change risk, and that sufficient information is available to inform financial decision-making. In addition, stewardship of companies by institutional investors will play an essential role in this area, to monitor and scrutinise companies with regard to their records in managing climate risk.
Glenn: The Government is expected to review progress in greening the UK’s financial system and publish an interim report in 2020. This will consider the progress of the industry’s implementation of the TCFD recommendations, and the Government may indicate whether it intends to legislate to introduce mandatory reporting obligations.
Imogen: In addition, we expect there to be a focus on upskilling and capacity building. In particular, the Green Finance Education charter, developed by the Government in collaboration with professional bodies and the GFI, will likely result in new ESG-focused qualifications designed for industry professionals operating across the financial sector. This may lead to expectations by UK regulators that staff subject to training and competence requirements should have an ESG-focused qualification where relevant to their work. In the context of the UK’s withdrawal from the European Union, the Government has endorsed the objectives of the EU Sustainable Action Plan and has retained the option of on-shoring EU legislative proposals relating to disclosures, benchmarks and taxonomy following exit day, with all three files included in the Financial Services (Implementation of Legislation) Bill.
The SEC issued an order that provides a publicly traded company 45 more days to file disclosure reports
The EPA will apply enforcement discretion for noncompliance: (i) during the period of the policy; (ii) that results from the COVID-19 pandemic.