ESG Global Vision

Financial disclosures

Timeline varies according to the type of organisation but the TCFD disclosures will be fully implemented by 2025

UK registered companies, financial advisers and institutions, insurers, pension schemes and other types of organisations

The government has announced that the UK will become the first country in the world to make TCFD-aligned disclosures fully mandatory on a phased basis across the economy by 2025.

Corporate governance policy and non-financial disclosures

In force

All companies subject to the Companies Act 2006

Under section 172 of the CA 2006, directors are under a duty to only act in a way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members.

In fulfilling that duty they must have regard to the non-exhaustive list of factors including the impact on stakeholder groups (e.g. employees, suppliers, customers and others) and the likely consequences and impact of their decisions (including for example, the long term impacts on the community and the environment).

For financial years beginning on or after 1 January 2019, large companies are required to include a separate section 172(1) statement in their strategic report describing how the directors have had regard to the matters set out in section 172(1)(a) to (f) of the CA 2006.

Non-financial disclosures

In force

Companies (other than those subject to the small companies regime)

Under section 414A of the CA 2006, the directors of a company must prepare a strategic report for each financial year of the company.

The contents of the strategic report must cover the factors listed in 414C. This includes information about the impact of the company's business on the environment, the company’s employees, and social, community and human rights issues, and information about any policies of the company in relation to those matters and the effectiveness of those policies.

Environmental policy

 In force on 1 October 2021

Authorised master trusts and occupational pension schemes with at least £5bn of assets.  From 1 October 2022 the requirements will extend to occupational schemes with at least £1bn of assets.

Regulations under the Pension Schemes Act 2021, applicable to authorised master trusts and very large occupational pension schemes, impose additional governance requirements in relation to the assessment and management of risks and opportunities arising from climate change.  Pension schemes within scope will also have to report in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

Corporate Governance policy

In force

Applies to all companies with a premium listing on a “comply or explain” basis.

The UK Corporate Governance Code issued by the Financial Reporting Council consists of principles of good governance in the areas of leadership, division of responsibilities, composition, succession and evaluation, audit, risk and internal control and remuneration, to ensure that a company operates effectively, complies with legal requirements and reports reliably.

The UK Corporate Governance Code applies to all companies with a premium listing, whether incorporated in the UK or elsewhere. The UK Corporate Governance Code is a "comply or explain" code.

Non-financial reporting

In force

Large employers (with at least 250 relevant employees)

For financial years beginning on or after 6 April 2017, large employers (with at least 250 relevant employees) are subject to mandatory gender pay gap reporting under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (SI 2017/172).

Companies not subject to the mandatory reporting requirements may wish to voluntarily disclose gender pay gap information in its CR report or its strategic report.

Non-financial disclosures

In force

Commercial organisations with an annual turnover of £36 million or more

The Modern Slavery Act 2015 includes an obligation on large commercial organisations to issue a public statement describing the steps they have taken during the financial year to deal with modern slavery risks in their supply chains and business.

Environmental policy

In force

Large businesses with a turnover over a specified threshold

The Environment Bill was passed in November 2021 and puts a number of environmental targets on a statutory footing, as well as creating a new watchdog ‘The Office for Environmental Protection’.

There are a number of new provisions that will apply to large businesses with a turnover over a specified threshold:

• A prohibition on using a forest degradation risk commodity or a product derived from that commodity in their UK commercial activities unless relevant local laws on that commodity were complied with; and requiring them to establish and implement a due diligence system for any forest risk commodity or a product derived from it used in their UK commercial activities, and report annually on their due diligence.
• Upcoming bans on selected single use plastic items
• A mandatory reduction in sewage discharge into river systems.

Non-financial disclosure, environmental policy

In force

All companies incorporated in the UK

In 2019, the UK committed Net Zero 2050 to law in its amendment to the Climate Change Act 2008. The target will require the UK to bring all greenhouse gas emissions to net zero by 2050. Companies are expected to report on their own contribution (where they have committed) and progress to net zero.

Environmental policy

In force

Large UK undertakings and their corporate groups

The UK government established ESOS to implement Article 8 of the EU Energy Efficiency Directive (2012/27/EU). The ESOS will continue to form part of domestic law following the end of the UK-EU transition period.

Organisations that qualify for ESOS must carry out ESOS assessments every 4 years. These assessments are audits of the energy used by their buildings, industrial processes and transport to identify cost-effective energy saving measures.

 Corporate governance policy

In force

A body incorporated under the law of any part of the UK

The Bribery Act 2010 requires commercial organisations to assess whether they have adequate procedures to ensure that they are not involved in bribery and corruption.

ESG policy

Voluntary standards

UK insurance and reinsurance firms and groups, banks, building societies, and PRA-designated investment firms

Supervisory statements set flexible frameworks for firms, incorporating new and existing expectations. They do not set absolute requirements – these are contained in rules. However, from a practical perspective, a firm would need to be able to demonstrate an objectively justifiable reason for departing from the guidance in a supervisory statement.

The PRA sets out its expectations regarding how firms should:

• embed the consideration of the financial risks from climate change in their governance arrangements;
• incorporate the financial risks from climate change into existing financial risk management practice;
• use (long term) scenario analysis to inform strategy setting and risk assessment and identification; and
• develop an approach to disclosure on the financial risks from climate change.

The PRA expects firms to engage with (presumably meaning they should become interested and actively involved in) wider initiatives on climate-related financial disclosures and to take into account the benefits of disclosures that are comparable across firms.

ESG policy

Voluntary standards

Firms of which investment strategy or investment decision could have a material impact on a policyholder's investment returns and relates to a product where the primary purpose is to provide and investment return and the investment risk is borne by a policyholder who is a natural person or a relevant policyholder.

This contains guidance setting out the FCA's expectations on how certain FCA-regulated firms may take into account ESG financial considerations and other financial considerations and non-financial matters as part of its investment strategy and investment decision making to demonstrate compliance with Principles 2, 3, 6 or 8.

ESG policy

Voluntary standards

Operators of a personal pension scheme or stakeholder pension scheme.

This contains guidance setting out the FCA's expectations on how certain FCA-regulated firms may take into account ESG financial considerations and other financial considerations and non-financial matters as part of its investment strategy and investment decision making to demonstrate compliance with Principles 2, 3, 6 or 8.

ESG policy

Voluntary standards

Firms, funds

The IA framework categorises, and provides standard definitions for, the different components of responsible investment. IA member firms are encouraged to adopt the framework to help bring clarity and consistency to investors on the approaches they take to responsible investment. IA members are asked to identify which funds should be classified as having responsible investment characteristics and this information feeds into IA reports.