UK regulator grants legal protections to climate transition plans
FCA says plans should be included in prospectuses, but gives them ‘protected forward-looking statements’ status
The Financial Conduct Authority (FCA) has introduced rules to ensure firms aren’t penalised for not achieving their climate transition plans.
The UK regulator’s latest policy statement, published on Tuesday, outlines details of a new regime governing corporate prospectuses, which will come into force from January 2026.
As part of the rules, companies that have published transition plans containing “material” information will have to include a summary of the plan in their investor prospectuses.
To reduce liability risks, the FCA confirmed that transition plans will qualify under a newly-created ‘protected forward-looking statements’ (PFLS) label.
Typically, if an investor files a case against a firm for not executing on what’s outlined a forward-looking statement, the company must demonstrate it was not negligent.
But for a PFLS, the burden of proof falls on the claimant, who must prove the firm didn’t achieve its commitment because it was made recklessly or dishonestly.
“For issuers, this reduces the risk of successful investor claims compared with the existing prospectus liability regime,” explained the FCA, which hopes the rule-change will encourage more transition plans to be published.
Climate disclosures
The policy statement also includes a chapter on sustainability disclosures in prospectuses.
The FCA confirmed it will focus exclusively on climate reporting until the International Sustainability Standards Board (ISSB) provides standards for other topics.
Its requirements align with the Taskforce on Climate-related Financial Disclosures’ framework, covering governance, strategy, risk management and metrics and targets.
“We may review this approach at a later stage once the ISSB Standards have been endorsed and implemented, and as UK [Sustainability Reporting Standards] and reporting approaches have further developed,” said the regulator.
Despite pushback during a recent public consultation, the rules will apply equity issuers but not borrowers.
The FCA is likely to consult on additional guidance later in the year.