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

Listed companies with listed equity shares (or certificates representing equity shares) admitted to a premium or standard listing.

The Listing Rules require in-scope listed companies to include the following information in their annual reports:

• A ‘comply or explain’ statement on whether they have achieved the following targets for women and ethnic minority representation on their board: (1) at least 40% of the individuals on the board are women; (2) at least one senior board member (chair, CEO, CFO or senior independent director) is a woman; and (3) at least one board member is from a non-white minority ethnic background.
• Numerical data (in a standardised format) on the ethnic background and gender identity or sex of their board and executive management team (i.e. the executive committee or the most senior executive or managerial body below the board including the company secretary).

Non-financial reporting

In force

Listed companies with transferable securities admitted to trading on a regulated market.

The Disclosure Guidance and Transparency Rules require in-scope listed companies to produce a corporate governance statement which includes the following information:

• A description of the company’s diversity policy applied to its administrative, management and supervisory bodies and the remuneration, audit and nomination committees of those bodies with regard to aspects such as age, gender, ethnicity, sexual orientation, disability or educational, professional and socio-economic backgrounds.
• A description of the objectives of the abovementioned diversity policy, how it has been implemented and the results in the reporting period.
• If the company does not have a diversity policy, an explanation of why that is the case.

Social policy

In force

All companies.

The Equality Act 2010 (the Act) prohibits discrimination, victimisation and harassment on the grounds of nine protected characteristics (age, disability, gender reassignment, marital or civil partnership status, pregnancy or maternity, race, religion or belief, sexual orientation and sex) and applies both in the context of employment but also in the provision of goods and services to a consumer (save in respect of age and marital or civil partnership status). 

The Act also contains enhanced protections for disabled persons including a prohibition against discrimination arising from a disability and a duty to make reasonable adjustments to alleviate situations where disabled persons are or would be placed at a disadvantage by a provision, criterion or practice. In addition, the Act enshrines the principle of equal pay for equal work between men and women and permits positive action in specific circumstances related to protected characteristics (as opposed to positive discrimination).

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.

Social policy

Not yet in force

All companies

When originally drafted, the Bill sought to introduce a positive duty on employers to take “all reasonable steps” to prevent the sexual harassment of employees.  However, the most recent draft of the Bill now proposes a duty on employers to take “reasonable steps” – no longer “all reasonable steps” – to prevent sexual harassment in the workplace.  It is anticipated that where an Employment Tribunal finds an employer has failed to take reasonable steps to prevent sexual harassment, the Employment Tribunal will have the power to award a 25% uplift to compensation payable.

The Bill also originally sought to amend the Equality Act 2010 so that employers are liable for the harassment of their employees by third parties (such as customers). However, this provision has now been removed in its entirety following concerns raised in the House of Lords about the curtailment of free speech. 

Non-financial reporting

In force

Large employers (with at least 250 employees on 5 April of each year).

Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (SI 2017/172) (the Regulations) require employers who employ 250 or more employees on 5 April of each year to publish an annual report on their gender pay gaps.  Reporting must include the disclosure of: mean and median gender pay gap; mean and median bonus pay gap; the proportion of male and female employees that receive bonus pay; and the proportion of male and female employees by quartile pay bands.  These metrics must be analysed on 5 April each year, and the gender pay gap report published within 12 months. The report must be published on the employer’s website and be accessible to employees and to the public for three years from publication.

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. 

In response to a 2018 consultation on mandatory ethnicity pay gap reporting the government recently confirmed it will not be legislating to make ethnicity pay gap reporting mandatory “at this stage”. 

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.