ESG Global Vision

Financial reporting

Phases 1 and 2 have been implemented. Phase 3 of TCFD is set to be implemented by 2026.

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

The TCFD was created by the G20 in the aftermath of the 2015 Paris Agreement, aiming to “improve and increase reporting of climate-related financial information”.

In 2017, the TCFD released climate-related financial disclosure recommendations designed to help companies provide better information to support market transparency and more informed capital allocation. These recommendations are split up into four ‘pillars’ (governance, strategy, risk management, and metrics and targets), and eleven recommended disclosures. 

The UK has incorporated these recommendations into its regulatory landscape through changes to the Financial Conduct Authority (“FCA”) Listing Rules, for major listed companies, through the Prudential Regulation Authority’s Supervisory Statement for banks, insurers, building societies, credit unions, and major investment firms, as well as through changes to the Companies Act for smaller listed companies and large privately owned businesses.

These changes have been, or will be, implemented in three phases: 

• Phase 1: This was implemented for the fiscal year 2023-2024 and covers:
  
  • the general principles of the TCFD, including scoping;
  • disclosure of general governance principles in relation to climate risks and opportunities, including the board’s oversight of the same, and senior management’s role in assessing these risks and opportunities; 
  • the disclosure of Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas emissions; and
  • the TCFD compliance statement requirements.
• Phase 2 was implemented for the 2024-2025 fiscal year, and covers:
  
  • disclosure of further metrics and targets; and
  • description of risk management processes (how the organisation plans to assess and manage relevant climate related risks and opportunities).
• Phase 3 is due to be implemented for the 2025-2026 financial year, and will cover:
  
  • the strategy recommendation requirement, i.e. disclosing climate risks, impacts, and opportunities; and
  • disclosure of the organisation’s plans and strategy to address the risks and opportunities that the organisation has identified over the short, medium, and long terms. 

Whilst the TCFD recommendations were designed as voluntary global standards, they are increasingly being made mandatory through national level legislation and regulation. In scope entities are required to comply with the requirements described above, or explain why they have not been able to do so (the comply or explain principle). 

It is also increasingly thought of as best practice for out of scope entities to attempt to comply with the recommendations.

There is extensive guidance on the UK government website, which links to other useful resources here. 

See this article for further detail.

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.

Non-financial disclosure 

The requirements set out in the framework are intended to come into force on or after 1 January 2025 and for reporting to begin in 2026.

All listed companies and financial services firms. 

The TPT was created in March 2022 in the wake of the COP26 climate conference, with a mission statement of producing a ‘gold standard Disclosure Framework for transition plans”. 

“Transition planning”, is the process by which polluting entities plan to make the methods of production/provision of their goods/services less greenhouse gas intensive, or net zero.

The Framework was published in October 2023, and is designed to compel companies to create realistic and actionable transition plans and to require them to disclose them to their investors and other stakeholders.  The framework outlines four main areas: (i) governance, (ii) strategy, risk management, (iii) metrics, and (iv) targets, providing a structured approach for companies to disclose their plans.

The framework is currently voluntary, however, the FCA and the UK government have signalled their intent to either introduce or consult on the introduction of the Framework as a mandatory disclosure requirement for listed companies and financial services firms. 

Financial disclosure

The government is currently aiming to make the investment standard available to firms in Q1 2025. 

All FCA authorised UK firms. 

The FCA’s SDR regime is a key part of the UK’s anti ‘greenwashing’ rules. It is intended to give investors greater clarity when making decisions about investments’ green credentials. 

The regime introduces four ‘investor labels’, which firms labelling investment products as ‘green’, ‘ESG focused’, ‘net zero’, ‘sustainable’, ‘low carbon’, or other similar terms will have to use. The labels proposed are:

1.)    Sustainability Impact
2.)    Sustainability Focus
3.)    Sustainability Improvers
4.)    Sustainability Mixed Goals 

The labels are based on sustainability reporting standards created by the International Sustainability Standards Board, and are therefore similar, if not identical, to standards in use across other jurisdictions.  The regime is opt in, however, there has been significant uptake of the similar regimes in other jurisdictions, and it is considered likely that it will be come industry standard and best practice to adopt these terms once they become available.  

For further detail, see the FCA’s consultation paper here. 

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.

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”. 

Social policy

In force from October 2024

All companies.

The Worker Protection (Amendment of Equality Act 2010) Act 2023 (the "2023 Act") will come into force in October 2024.

The 2023 Act introduces a new s. 40A of the Equality Act 2010 (the "EqA 2010"), to require all employers to take "reasonable steps" to prevent the sexual harassment of their employees in the course of their employment.

There are two main things to note about the new mandatory duty:

1. The Equality and Human Rights Commission (the "EHRC") will be able to take direct enforcement action against employers who breach the mandatory duty; and
2. The Employment Tribunal may apply a compensation uplift of up to 25% for breach of the mandatory duty, in successful sexual harassment claims (compensation uplift).

The EHRC recently published updated technical guidance on the duty to prevent sexual harassment, to outline how employers can fulfil their duty. The updated guidance, published by the EHRC on 9 July (the "Draft Guidance") makes clear that a positive duty to prevent sexual harassment covers sexual harassment by third parties, which would include clients, customers, contractors etc. Therefore, employers will likely need to take third party harassment into account when taking "reasonable steps" to prevent sexual harassment.  Consultation on the Draft Guidance has now closed.  The Draft Guidance can be found here:

Sexual harassment and harassment at work: technical guidance | EHRC (equalityhumanrights.com).

For more information, please see this podcast: Employment Bite: The Duty to prevent sexual harassment in the workplace.

Social policy

In force

All companies

The Employment Relations (Flexible Working) Act 2023 (the "Act") came into force on 6 April 2024.

The Act made amendments to s. 80F and s. 80G of the Employment Rights Act 1996 ("ERA 1996"). This resulted in a number of key changes to how flexible work requests are dealt with:

• When making a flexible work request, the employee no longer has to explain what effect they think their requested change will have on the employer, and how this should be dealt with.
• Employees are entitled to two, rather than just one, request in a 12-month period. Note that it will not be possible for an employee to make a further application while another application to the same employer is already proceeding.
• An employer is not permitted to refuse a request unless the employee has been consulted.
• The time for an employer to make a decision has been reduced from three to two months. However, it is possible for the parties to agree a longer period.

Social policy

In force

All companies

The Flexible Working (Amendment) Regulations 2023 (SI 2023/1328) (the "Regulations") came into force on 6 April 2024. The Regulations mean that the right to request flexible working will be a "day one" right for employees, by removing the need for the employee to have been continuously employed for a period of at least 26 weeks.

For more information please see this podcast: Employment Bite: Flexible Working

Social policy

Not yet in force

All companies

The King announced the Labour Government’s legislative programme for the new Parliamentary session at the State Opening of Parliament, including a draft bill to:

1. Enshrine in law the full right to equal pay for ethnic minorities and disabled people; and
2. Introduce mandatory ethnicity and disability pay gap reporting for employers with at least 250 employees.

When the Employment Rights Bill was published on 10 October 2024, the Governed also published a Next Steps to make Work Pay (“Next Steps”) document, which provides commentary on the Bill together with details of future reforms. In this document, the Government confirmed its intention to begin consulting on this legislation in due course.

According to the Next Steps document, in addition to the two proposals above, measures may include ensuring that outsourcing of services can no longer be used by employers to avoid paying equal pay; and, implementing a regulatory and enforcement unit for equal pay with involvement from trade unions. 

A draft Bill is to be published during this parliamentary session for pre-legislative scrutiny. Further consultation will also take place prior to the making of secondary legislation implementing these reforms.

Social policy

The Bill was introduced to Parliament on 10 October 2024. The Bill will now make its way through Parliament. Its second reading will take place on 21 October 2024 and, given the strength of political will, we anticipate that it will move promptly to Committee, with the potential for Commons stages to be completed by Christmas, or early January 2025, before it moves to the House of Lords.

There will also be further consultations on the detail of how many of the new rights will operate in practice during 2025, and the government has confirmed that the majority of the changes will not be in force before 2026.

All companies.

The proposed measures of the Bill include:

• giving pregnant employees, and those on or who have recently returned to work from maternity leave more protection against dismissal, by making it unlawful to dismiss them other than in specific circumstances;
• making flexible working the default, so employers will have to agree to flexible working requests unless they can show that their refusal is reasonable;
• requiring large employers with 250 or more employees to have action plans to address their gender pay gaps and to support employees during the menopause;
• day one rights to paternity and unpaid parental leave; and
• strengthening protection against sexual harassment by requiring employers to take “all” reasonable steps to prevent such harassment, prohibiting third party harassment and extending whistleblowing protection to cover disclosures about sexual harassment.

 For more information, see this article.

Financial reporting

Phases 1 and 2 have been implemented. Phase 3 of TCFD is set to be implemented by 2026.

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

The TCFD was created by the G20 in the aftermath of the 2015 Paris Agreement, aiming to “improve and increase reporting of climate-related financial information”.

In 2017, the TCFD released climate-related financial disclosure recommendations designed to help companies provide better information to support market transparency and more informed capital allocation. These recommendations are split up into four ‘pillars’ (governance, strategy, risk management, and metrics and targets), and eleven recommended disclosures. 

The UK has incorporated these recommendations into its regulatory landscape through changes to the Financial Conduct Authority (“FCA”) Listing Rules, for major listed companies, through the Prudential Regulation Authority’s Supervisory Statement for banks, insurers, building societies, credit unions, and major investment firms, as well as through changes to the Companies Act for smaller listed companies and large privately owned businesses.

These changes have been, or will be, implemented in three phases: 

• Phase 1: This was implemented for the fiscal year 2023-2024 and covers:
  
  • the general principles of the TCFD, including scoping;
  • disclosure of general governance principles in relation to climate risks and opportunities, including the board’s oversight of the same, and senior management’s role in assessing these risks and opportunities; 
  • the disclosure of Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas emissions; and
  • the TCFD compliance statement requirements.
• Phase 2 was implemented for the 2024-2025 fiscal year, and covers:
  
  • disclosure of further metrics and targets; and
  • description of risk management processes (how the organisation plans to assess and manage relevant climate related risks and opportunities).
• Phase 3 is due to be implemented for the 2025-2026 financial year, and will cover:
  
  • the strategy recommendation requirement, i.e. disclosing climate risks, impacts, and opportunities; and
  • disclosure of the organisation’s plans and strategy to address the risks and opportunities that the organisation has identified over the short, medium, and long terms. 

Whilst the TCFD recommendations were designed as voluntary global standards, they are increasingly being made mandatory through national level legislation and regulation. In scope entities are required to comply with the requirements described above, or explain why they have not been able to do so (the comply or explain principle). 

It is also increasingly thought of as best practice for out of scope entities to attempt to comply with the recommendations.

There is extensive guidance on the UK government website, which links to other useful resources here. 

See this article for further detail.

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 since November 2023.

Applies to large UK undertakings and their corporate groups. 

Large undertakings include a company which either:

• employs 250 or more people; or
• has an annual turnover in excess of £44 million and an annual balance sheet total in excess of £38 million.

Affected companies must carry out ESOS assessments every 4 years. 

The assessments are audits of the energy used by their buildings, industrial processes and transport. To complete an assessment, a company must:

1. Calculate their total energy consumption.
2. Identify their areas of significant energy consumption.
3. Calculate their energy intensity ratios.
4. Decide on their route(s) to compliance and appoint a lead assessor.
5. Carry out any necessary ESOS energy audits.
6. Complete the ESOS report and share with the corporate group.
7. Notify the Environment Agency.

The environmental regulator has the power to issue civil sanctions, including financial penalties, if a company is found to be non-compliant with the Scheme,

Non-financial reporting 

In force

All publicly listed UK companies, and unlisted companies, Limited Liability Partnerships (“LLPs”), and groups that exceed at least two of the following three thresholds over the final year:

• £36m annual turnover
• £18m net balance sheet
• 250 employees

Entities are exempt from the reporting requirements if they can show that their annual energy use is below 40 MWh.

The SECR is intended to increase awareness of energy use, greenhouse gas emissions, and costs within large organisations, and to ensure that reporting obligations are proportionate and align with other the requirements of other reporting regulations. The Government intends that the SECR will give investors and other stakeholders greater transparency on entities’ emissions and incentivise energy efficiency within the private sector.

The SECR replaces the new defunct the Mandatory Greenhouse Gas Reporting scheme. 

Reporting requirements for companies caught by the SECR differ for listed and unlisted companies:

• Listed companies must report:
  
  • Global Scope 1 and 2 emissions (Scope 3 is voluntary but recommended). 
  • Emissions intensity ratios (i.e. greenhouse gas emissions per product sold (or another applicable metric)). This is designed to allow comparisons between companies of different sizes.
  • Underlying global energy use over the reporting year.
  • Underlying energy use and greenhouse gas emissions for the previous reporting year.
  • Energy efficiency measures and steps taken by the company over the financial year.
  • The methodology used to prepare the report. 
• Unlisted companies and LLPs must report:
  
  • UK energy use and greenhouse gas emissions.
  • The previous year’s UK energy use and greenhouse gas emissions
  • At least one emissions intensity ratio
  • Energy efficiency measures and steps taken by the company over the financial year
  • The methodology used to prepare the report.

The SECR contains a ‘comply or explain clause’, which is common across similar regulations. This allows entities to not provide information where it is not feasible/proportionate to collect it, if they are able to provide sufficient explanation of the difficulties in doing so.  

The government has published detailed guidance on compliance.

Non-financial disclosure 

The requirements set out in the framework are intended to come into force on or after 1 January 2025 and for reporting to begin in 2026.

All listed companies and financial services firms. 

The TPT was created in March 2022 in the wake of the COP26 climate conference, with a mission statement of producing a ‘gold standard Disclosure Framework for transition plans”. 

“Transition planning”, is the process by which polluting entities plan to make the methods of production/provision of their goods/services less greenhouse gas intensive, or net zero.

The Framework was published in October 2023, and is designed to compel companies to create realistic and actionable transition plans and to require them to disclose them to their investors and other stakeholders.  The framework outlines four main areas: (i) governance, (ii) strategy, risk management, (iii) metrics, and (iv) targets, providing a structured approach for companies to disclose their plans.

The framework is currently voluntary, however, the FCA and the UK government have signalled their intent to either introduce or consult on the introduction of the Framework as a mandatory disclosure requirement for listed companies and financial services firms. 

Financial disclosure

The government is currently aiming to make the investment standard available to firms in Q1 2025. 

All FCA authorised UK firms. 

The FCA’s SDR regime is a key part of the UK’s anti ‘greenwashing’ rules. It is intended to give investors greater clarity when making decisions about investments’ green credentials. 

The regime introduces four ‘investor labels’, which firms labelling investment products as ‘green’, ‘ESG focused’, ‘net zero’, ‘sustainable’, ‘low carbon’, or other similar terms will have to use. The labels proposed are:

1.)    Sustainability Impact
2.)    Sustainability Focus
3.)    Sustainability Improvers
4.)    Sustainability Mixed Goals 

The labels are based on sustainability reporting standards created by the International Sustainability Standards Board, and are therefore similar, if not identical, to standards in use across other jurisdictions.  The regime is opt in, however, there has been significant uptake of the similar regimes in other jurisdictions, and it is considered likely that it will be come industry standard and best practice to adopt these terms once they become available.  

For further detail, see the FCA’s consultation paper here. 

 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.