UK highlights

FCA publishes Primary Market Bulletin 45

On 10 August 2023, the Financial Conduct Authority (FCA) published Primary Market Bulletin 45 (PMB 45) in which it says that it plans to consult on the implementation of disclosure rules based on the UK sustainability disclosure standards (UK SDS) in the first half of 2024. Assuming that the UK endorsement of the first two International Sustainability Standards Board (ISSB) standards (IFRS S1 and IFRS S2) is completed by July 2024, the FCA aims to finalise its approach by the end of 2024. The new requirements will apply to financial years beginning on or after 1 January 2025, with the first reporting being required in 2026.

The FCA also confirmed that it will consult on its proposals for the publication of climate transition plans by listed companies, building on the work of the UK Transition Plan Taskforce (TPT). The TPT is expected to publish its final disclosure framework for transition plans in October 2023.

The FCA also noted in PMB 45 two related workstreams on sustainability disclosure requirements:

  • the ISSB’s draft digital taxonomy published in July; and
  • the work of the International Auditing and Assurance Standards Board (IAASB) on international assurance standards for sustainability reporting (see below).

Read more – ISSB standards

Read more – climate transition plans

High Court refuses ClientEarth’s application for permission to appeal and orders costs of proceedings in favour of Shell

In a judgment released on 31 August 2023, the High Court has ordered ClientEarth to pay for Shell’s costs relating its written submissions and attendance at the hearing dealing with the environmental law NGO’s application for permission to continue its derivative claim, which the High Court subsequently refused (see our earlier blog post). In the same judgment, Mr Justice Trower conveyed that he has also refused ClientEarth’s application for permission to appeal to the Court of Appeal. It is not yet clear whether ClientEarth will seek permission from the Court of Appeal itself.

Mr Justice Trower’s costs ruling comes despite ClientEarth’s reliance on Civil Procedure Rule Practice Direction 19A, paragraph 2, which provides that a company will not normally be allowed any costs of its submission or attendance if the company volunteers a submission or attendance without invitation from the court. Mr Justice Trower came to the conclusion that the case was far from the norm for many reasons, including that:

  • ClientEarth’s claim was bound to attract considerable publicity and that a mere finding of a prima facie case would have a significant adverse impact on Shell’s business;
  • ClientEarth made serious allegations of breach of duty against all the directors of a large global company and criticised its future-looking business strategy rather than identifying specific acts of corporate wrongdoing; and
  • ClientEarth was the holder of a small number of shares and, although a large body of shareholders signalled their support for ClientEarth’s objectives, there was little if any support for the course it ultimately decided to take.

As such, according to Mr Justice Trower, it was appropriate and proportionate for Shell to participate at the prima facie stage and the company should be entitled to its costs for doing so.

Read more – ClientEarth v Shell’s board of directors

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EU highlights

EFRAG publishes draft guidance on materiality assessment

On 18 August 2023, the European Financial Reporting Advisory Group (EFRAG) published its draft implementation guidance on the double materiality assessment to accompany the European Sustainability Reporting Standards (ESRS). The guidance seeks to explain at a high level what the double materiality assessment is, why it’s needed, how it’s performed and how it interacts with other sustainability reporting standards (such as those of the Global Reporting Initiative (GRI) and the ISSB). The guidance also includes a set of FAQs, addressing commonly asked questions in relation to impact and financial materiality and the assessment and reporting processes, among other areas. Notably, the guidance is published under the sole responsibility of EFRAG (and not the European Commission) and is expressed to be non-authoritative and not to form part of the ESRS. Given EFRAG’s cardinal role in developing the ESRS, however, the guidance is likely to be of considerable practical value for corporates and regulators considering the implementation and application of the ESRS.

The draft guidance was published for the purposes of discussion at a meeting of EFRAG’s Sustainability Reporting Board (responsible for EFRAG’s sustainability reporting positions, including the provision of technical advice to the European Commission on the ESRS and any amendments thereto), held on 23 August 2023. Accordingly, we understand that an amended version of the guidance is likely to be published in due course. We will keep you posted on developments as they unfold.

Read more – ESRS

ESMA updates sustainable finance implementation timeline

On 3 August 2023, the European Securities and Markets Authority published its updated sustainable finance implementation timeline. The timeline details relevant deadlines and dates in the implementation of several pieces of sustainability-related legislation including, but not limited to, the Sustainable Finance Disclosure Regulation, the Taxonomy Regulation and the Corporate Sustainability Reporting Directive.

International highlights

IAASB proposal for global sustainability assurance standard

On 2 August 2023, the IAASB launched a public consultation on a landmark proposed global sustainability assurance standard (ISSA 5000). According to the IAASB, the proposed standard has been designed as a global baseline for sustainability assurance and is adaptable to information prepared by any sized entity, and to work with information prepared under any suitable sustainability reporting framework, including those issued by the EU, ISSB, GRI, International Organization for Standardization and others. To achieve broad stakeholder input, the IAASB says it will hold a series of roundtables on the new standard and take part in virtual, regional, and national events throughout the consultation period, with stakeholders invited to comment on the proposals until December 1, 2023.

TNFD study on growing demand for nature-related data ahead of publication of final framework

On 11 August 2023, the Task Force on Nature-related Financial Disclosures (TNFD) published a study concluding that demand for nature-related data is growing quickly and a global nature-related public data facility could scale the availability, quality and maintenance of nature data with significant benefits for public, private and civil society stakeholders globally. In summary, high-quality, nature-related data is a global public good demanded with increasing frequency by a wide array of public, private and civil society stakeholders. The TNFD is due to publish its final disclosure framework on 18 September 2023.