ESG regulatory outlook 2024

14 March 2024 / Insight posted in Article

2024 will see the introduction of new, and amendments to existing, ESG regulation. If you would like to discuss how you can make sure your organisation is compliant, please contact us.

The UK’s Climate-Related Financial Disclosure Regulations

Through 2024, an increasing number of companies and LLPs will be required to report under the Climate-Related Financial Disclosure Regulations (CFD), which is required for financial years commencing on or after 6 April 2022. This requires climate-related financial disclosures in a non-financial and sustainability statement or energy and carbon report.

What comes under CFD?

CFD disclosures use The Taskforce on Climate-related Financial Disclosures (TCFD) as a basis. There are four pillars that organisations meeting the reporting threshold will be required to report against:

  1. Governance – the organisation’s governance around climate-related risks and opportunities.
  2. Strategy – the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning. This should include an analysis of the resilience of the company’s business model and strategy.
  3. Risk management – the processes used by the organisation to identify, assess and manage climate-related risks.
  4. Metrics and targets – the metrics and targets used to assess and manage relevant climate-related risks and opportunities.

The UK’s Sustainability Disclosure Standards

Following the publication of the International Sustainability Standards Board’s (ISSB) first two standards, S1 and S2, the UK Department for Business and Trade has begun the review process to determine adoption by UK organisations. A determination is expected by July 2024.

Given the UK’s previous support of the ISSB and the global reach of the reporting requirements, we expect a quick implementation. Adoption of the standards will ensure UK companies and capital markets remain competitive and are providing investors with globally comparable information.

The EU’s Corporate Sustainability Reporting Directive

Large EU companies have begun reporting under the Corporate Sustainability Reporting Directive (CSRD). This applies to accounting periods commencing on or after 1 January 2024, with the first reports being made in 2025. Building on the previous Non-Financial Reporting Directive (NFRD) regulations, CSRD aims to increase transparency and comparability of corporate sustainability reporting and facilitate the transition to a sustainable economy. It requires companies to report on a wide range of sustainability topics, including environmental, social and governance (ESG) issues, human rights and anti-corruption measures. For UK entities, this is likely to include gathering the necessary information and providing it to the parent company. The information is subject to mandatory assurance, which may be undertaken by the group’s auditors.

The FCA’s Sustainability Disclosure Requirements

At the end of 2023, the Financial Conduct Authority (FCA) published the Sustainability Disclosure Requirements (SDR) and investment labels regime targeting the marketing of sustainable financial products. The regime comprises an anti-greenwashing rule for all FCA-authorised firms and new rules on sustainability labels, disclosures and marketing for all UK asset managers.

Ensure your organisation is prepared for the following key dates:

  • 31 May 2024 – anti-greenwashing rule comes into force.
  • 31 July 2024 – firms can begin using labels with the accompanying disclosures.
  • 2 December 2024 – naming and marketing rules come into force.

How can we help?

Preparing for compliance with any of the above regulations requires reporting entities to gather a significant amount of information and data, as well as consider a range of climate-related scenarios and how they could impact the business. Our team of ESG advisory and reporting experts can support you on this journey.

We take a multi-stage approach to supporting your compliance, considering what is material to your business and industry. We work closely with you to consider the principal risks and opportunities related to climate change that could impact your business, and how you can respond to these.

This is not an exhaustive list of all changes. Further changes and additions may happen throughout the year. Ensure you’re regularly checking in with your adviser.

For more information, please contact our team.

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