- 13 February 2025
Thank you for your interest in our updates on the latest regulatory developments. There are a number of issues of interest this month. Do, please, feel free to bring these to the attention of colleagues for whom they might also be relevant.
Peter Swabey FCG,
Policy & Research Director
Of interest to members involved in boards of large or regulated organisations
REQUEST FOR SUPPORT FROM MEMBERS
The Institute is collaborating with Loretto Leavy FCG and Professor Ruth Sealy of the University of Exeter Business School and Henley Business School to understand board behavioural dynamics within large and regulated organisations. The overall aim is to publish practical ‘how to’ guidance and recommendations for boards which highlight how boards come together effectively as a collective decision-making body. We reviewed 50 FTSE boards and have carried out 14 workshops with members to validate the underlying findings of the research and recommendations. We are very grateful for those who showed interest, attended and contributed to these workshops and have otherwise participated in the research to date.
The Guidance launched on 3 February for consultation until 3 April. Please do let us know your thoughts on this important area of practice. We aim to launch the final Guidance at the Institute’s conference in July.
The Institute is delighted to support this research which will provide a framework for maintaining relationships which can be used by boards and chairs to improve effectiveness and will provide additional practical ‘how to’ advice for company secretaries and governance professionals assisting boards. Please register your interest in the research or contact Loretto Leavy.
Of interest to all working in corporate governance
REQUEST FOR SUPPORT FROM MEMBERS
Thank you to all those members who have contributed to our response to the Financial Reporting Council’s consultation on proposed changes to the UK Stewardship Code,especially those who joined us at our virtual member roundtable on 29 January.
We are now finalising our response before the deadline on 19 February. If you have any thoughts that you have not shared with us and would like to have your voice included in our response to the FRC, please contact Valentina Dotto at policy@cgi.org.uk.
Of interest to all those working in corporate governance
REQUEST FOR SUPPORT FROM MEMBERS
The FCA is consulting on a proposal published in November 2024 to improve market transparency and to publicise its ongoing enforcement commitments.
The key proposals are:
- Public Interest Test: The FCA will consider the impact of an announcement on the firm when deciding whether to disclose an investigation and name the firm.
- Notice Period: Firms will get 10 business days’ notice, with an additional 2 days if the FCA proceeds. This replaces the original 1-day notice period, giving firms more time to respond.
- Market Confidence: The FCA proposes that the potential damage to public confidence in the financial system should factor into the public interest test.
- Proactive Announcements: The FCA will not proactively announce ongoing investigations but may confirm those already publicly known if deemed in the public interest.
While the FCA says the plan will educate the market, critics argue it may undermine the “innocent until proven guilty” principle. They also expressed concerns about fairness and share price impact.
The full proposal is open for consultation until the 17th of February. The Institute will be responding to the consultation. If you would be willing to help with the drafting of that response, please contact Valentina Dotto at policy@cgi.org.uk.
Of general interest to all members
On 29 January, the Institute responded to the government’s Governance of AI consultation: Guidance for using the AI Management Essentials tool. Many thanks to all those members who contributed their thoughts to this response.
Of interest to all working with boardroom diversity
On 11 February, Indigo: Independent Governance and Addidat published their joint report on Gender Diversity in AIM Company Boards. This is the third such report and, disappointingly, shows that progress has largely stalled, with the proportion of women directors across the AIM market stuck at 1 in 6 appointments and the proportion of all-male boards also having increased slightly to 38% from 37% last year.
Of interest to all involved in corporate reporting
On 21 January, the Financial Reporting Council published a review of Climate-related Financial Disclosures (CFD) by AIM and large private companies, following the first cycle of mandatory reporting. According to the FRC press release, “The review found that, while preparers have endeavoured to meet the CFD requirements, there was inconsistent quality among the companies selected. As a new requirement, this is the first time the FRC has carried out a review of this reporting, which aims to highlight key lessons for AIM and large private companies in scope of CFD requirements.
The publication sets out examples of good practice and identifies areas where preparers can provide more consistent, coherent and concise disclosures. The FRC recognises that reporting practices will continue to mature in subsequent years and our review can be used as a resource by preparers to support them as they continue to develop their climate-related disclosures.”
There is a helpful analysis by Slaughter and May.
Of interest to all working in charity governance
The Charity Finance Group has published the Charity Investment Governance Principles, following the 2022 case Butler-Sloss v The Charity Commission and the CC14 guidance. The guide helps trustees align investments with their charity’s mission and legal duties.
Of interest to all working in charity governance
AI is playing an increasing role in supporting funding bids within the charity sector. Charities are using AI to automate application processes and target funding opportunities more effectively, making the bidding process more efficient and boosting their chances of securing financial support.
Acknowledging AI’s growing role, the National Lottery Community Fund has issued guidance on using AI for funding applications to improve accessibility and efficiency for organisations applying for funding. It has also outlined 10 AI Principles, discussing how AI can be used to benefit communities.
The Fund will host a free online event on 11 March to discuss its guidance, share insights and promote collaboration across the sector. See here: AI can be a powerful force for good: harnessing Artificial Intelligence for people and communities | The National Lottery Community Fund.
Of general interest to all members
On 13th January 2025, the UK Prime Minister announced a plan to drive national renewal using artificial intelligence (AI). The government will implement all 50 recommendations from Matt Clifford’s AI Opportunities Action Plan. This plan positions AI as a central focus across various sectors, including healthcare, finance, and public services. The government aims to position the UK as a global leader in AI and use it to support economic and technological growth.
Of interest to those working on sustainability and ESG issues
In December 2024, the EU Gender Balance on Corporate Boards Directive came into force. Member States must now implement the Directive in national law, requiring listed companies to meet binding gender targets by June 30, 2026.
The Directive mandates that large EU-listed companies conduct transparent, gender-neutral selection processes, giving preference to equally qualified candidates from the underrepresented sex. They will need to report board compositions and disclose qualification criteria ensuring that least 40% of non-executive directors or 33% of all directors are from the underrepresented sex.
After June 30, 2026, member States will publish a list of all the non-compliant large EU-listed companies.
Of interest to those working on reporting, sustainability and ESG issues
The EU Corporate Sustainability Reporting Directive (CSRD) requires the first group of companies to publish their reports in 2025, covering the 2024 financial year. The CSRD came into force on 2023, broadening sustainability reporting obligations for large companies, listed SMEs, and non-EU companies with over EUR 150 million in EU market revenue. The Directive aims to provide clearer data on companies’ social, environmental impacts, and financial risks tied to climate change, enabling investors and stakeholders to make better-informed decisions. It also seeks to reduce reporting costs over time by harmonising the information companies must provide.
However, delays in transposing the CSRD into national law have created uncertainty for some companies, while the development of sector-specific European Sustainability Reporting Standards (ESRS) by EFRAG is ongoing, adding further complexity. The European Commission has proposed an Omnibus package to simplify the requirements, but the details - such as potential delays, exemptions, or reductions in reporting demands -remain unclear.
Of interest to those working on reporting, sustainability and ESG issues
Over 30 jurisdictions, including the UK, are implementing the International Sustainability Standards Boards (ISSB) IFRS S1 and S2. These standards aim to create global consistency in sustainability reporting. However, differences in adoption and issues with interoperability between ISSB, the EUs CSRD, and other frameworks like GRI are creating challenges for multinationals. Grant Thornton has published a guide which provides an overview of the progress in adopting IFRS S1 and S2, highlighting their global impact.
Meanwhile, in the UK in December 2024, the Financial Reporting Council, as secretariat to the UK Sustainability Disclosure Technical Advisory Committee (TAC), published recommendations to the Secretary of State (SoS) for Business and Trade. The TAC recommended endorsing the ISSBs Sustainability Disclosure Standards (S1 and S2). Its recommendations also included amendments focusing on financed emissions, reliefs, and operative dates. The next step is for the SoS to consult on endorsing these standards, which would form the basis for UK Sustainability Reporting Standards (UK SRS).
The UK SRS will be voluntary in 2025, with mandatory disclosures expected soon after. Companies should prepare for these changes and the forthcoming disclosure requirements.
And finally, some articles that passed across my desk and struck me as being of interest to members:
2025 AGM Season: Latham and Watkins have published an interesting analysis of Key Topics for the 2025 UK AGM Season.
Linklaters ESG Legal Outlook 2025: Linklaters has published their annual ESG Legal Outlook 2025, which looks at the rapid development of ESG policies and regulations worldwide. The report discusses concerns about the private sector’s ability to keep up with these changes, especially given the challenges of energy costs and competitiveness. Linklaters predicts that the pace of change will slow, with a focus shifting towards practical implementation. This will give businesses the space they need to adapt to and integrate ESG requirements more effectively.
On the subject of further reading, it would be remiss of me not to mention the CGIUKI blogs published in January:
13 January - The ESG Implications of Big Tech
20 January - Navigating UK Listing Rule Reforms: Lessons from Shein’s Prospective London IPO