Policy paper

Framework and Terms of Reference for the Development of UK Sustainability Reporting Standards

Published 16 May 2024

This was published under the 2022 to 2024 Sunak Conservative government

Introduction

1․ On 3 November 2021, the International Financial Reporting Standards (IFRS) Foundation announced the formation of the International Sustainability Standards Board (ISSB). This announcement followed strong demand from the investment community for the creation of standards that will lead to the disclosure of high-quality and globally comparable sustainability-related information, which users of general purpose financial reports can use to make decisions. The announcement also recognised the strong desire – from preparers and users of financial reports – to address the fragmented landscape of voluntary, sustainability-related standards that has evolved in recent years.

2․ On 26 June 2023, the ISSB issued its first standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. These standards incorporate and build from the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

3․ The UK government strongly supports the development of international standards for disclosure of sustainability-related information and agrees that the provision of globally comparable sustainability-related information is vital for the effective functioning of capital markets. In line with the G7, G20, and the International Organisation of Securities Commissions (IOSCO), the UK government welcomes the work of the ISSB, which it believes will play an important role in developing a global baseline for sustainability-related disclosure standards and advancing this important agenda over the coming years. The UK government also welcomes the strong oversight and due process in place within the IFRS Foundation, which are vital to ensuring the creation of high-quality standards in which investors and preparers can place their confidence.

4․ Although the issuance of the ISSB’s first standards is a welcome milestone towards the provision of globally comparable sustainability-related information, it is only the first step to ensuring the delivery of decision-useful information on sustainability matters. Companies may choose to use the ISSBTM standards (IFRS Sustainability Disclosure Standards) on a voluntary basis, but the ISSB does not have a formal role within the legal frameworks of individual jurisdictions. As a result, national governments, regulators, and standard setters have a vital role in considering how to best support the application of IFRS Sustainability Disclosure Standards in a local context, whilst supporting the ISSB’s objective to deliver a common language for companies to report on sustainability-related risks and opportunities across jurisdictions.

5․ The ISSB also has an important role to play to develop capacity with emerging and developing economies. The UK government is keen to support this work, recognising the importance of international standards catering to the needs of countries at all stages of economic development.

6․ In 2023, the UK government committed – in Mobilising green investment: 2023 green finance strategy – to establishing a framework to assess and decide whether to endorse IFRS Sustainability Disclosure Standards for use within a UK context. The purpose of this document is to explain that endorsement process in more detail, and the associated roles and responsibilities of the UK government, UK regulators, standard-setters and advisory committees. In addition, this document explains how the UK government, the Financial Conduct Authority (FCA) and other parties will work together to co-ordinate future decisions to implement UK Sustainability Reporting Standards. All UK Sustainability Reporting Standards will be made publicly available.

7․ Finally, it is important to note that the development of UK Sustainability Reporting Standards is one part of a wider programme of work that the UK government is undertaking, alongside the FCA, to develop a Sustainability Disclosure Requirements (SDR) regime within the UK. Mobilising Green Investment: 2023 green finance strategy contains further information on SDR.

Structure of this document

8․ Section A summarises the overall ‘endorsement’ and ‘implementation’ framework that is being established within the UK. The purpose of this section is to give interested stakeholders the information they need to understand the phases of work that need to be undertaken for the development of UK Sustainability Reporting Standards and to give effect to legislative or regulatory changes that may be made in future once the UK Sustainability Reporting Standards are finalised. Among other things, this section explains that:

• the Secretary of State for Business and Trade (Secretary of State) will hold responsibility for endorsing IFRS Sustainability Disclosure Standards^{[footnote 1]} to create UK Sustainability Reporting Standards
• the term ‘endorsement’ is used to refer to the creation of a set of UK Sustainability Reporting Standards that will become available for voluntary use by UK companies and will form the basis of any future requirements in, or amendments to, UK legislation and regulation – the term endorsement does not refer to the creation of legal obligations for companies to use UK Sustainability Reporting Standards
• when making endorsement decisions, the Secretary of State will be supported by recommendations and advice from the UK Sustainability Disclosure Technical Advisory Committee (TAC) and by the Department for Business and Trade (DBT)
• the term ‘implementation’ is used to refer to future decisions that may be taken to reference UK Sustainability Reporting Standards in legislation or regulation – this includes future decisions that may be taken to require reporting against UK Sustainability Reporting Standards or to exempt companies from existing requirements should they choose to use UK Sustainability Reporting Standards voluntarily
• the FCA holds responsibility for implementation decisions that would apply to UK listed companies, while the UK government holds responsibility for implementation decisions that would apply to UK registered companies^{[footnote 2]}
• the UK government has established a UK Sustainability Disclosure Policy and Implementation Committee (PIC), which will be responsible for co-ordinating implementation decisions taken by DBT and the FCA

9․ Section B provides a terms of reference (ToR) for the TAC. These ToR include further details regarding the TAC’s membership, its transparency and working arrangements, and its key roles and responsibilities when providing advice to the Secretary of State.

10․ Section C provides a ToR for the PIC. These ToR include further detail regarding the PIC’s membership and its key roles and responsibilities within the endorsement and implementation process.

11․ This document will be reviewed by the Secretary of State following endorsement decisions for IFRS S1 and IFRS S2. It will continue to be reviewed by the Secretary of State at least every 5 years.

Section A: overview of the UK framework

1․ The purpose of Section A is to provide a summary of the work that needs to be undertaken to create UK Sustainability Reporting Standards and to implement these standards in UK legislation and regulations. This work can be divided into the following 3 phases:

• the development of IFRS Sustainability Disclosure Standards by the ISSB
• the endorsement of IFRS Sustainability Disclosure Standards, resulting in the creation of UK Sustainability Reporting Standards, by the Secretary of State
• the implementation of UK Sustainability Reporting Standards through UK legislation and FCA’s rules for listed companies

2․ Each phase is described in greater detail as follows.

a) The development of IFRS Sustainability Disclosure Standards by the ISSB

3․ The development of IFRS Sustainability Disclosure Standards by the ISSB is the foundational step that underpins the subsequent ‘endorsement’ and ‘implementation’ phases that are set out later in this document. The ISSB’s objective is to develop ‘standards that will result in a high-quality, comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets’^{[footnote 3]}. The ISSB published its first 2 standards in June 2023 and is expected to develop further standards in the future. Standards issued by the ISSB can be used voluntarily by companies but will have no legal force in the UK.

4․ When conducting its standard-setting work, the ISSB is subject to due process and oversight procedures that are designed to ensure the delivery of high-quality standards in which stakeholders can place their trust. For instance, meetings of the ISSB are held in public, draft standards are subject to public consultation and working papers are made available online. In addition, the ISSB is subject to the oversight of the IFRS Foundation’s Due Process Oversight Committee, which is also responsible for overseeing the due process of the International Accounting Standards Board. The IFRS website contains further information on the Due Process Oversight Committee can be found on its website^{[footnote 4]}.

5․ Throughout the ISSB’s standard-setting process, the UK government – together with UK regulators and standard setters – will have an important role in communicating the needs and preferences of UK investors, preparers and other stakeholders to the ISSB. The TAC will provide a focal point for UK stakeholders to influence the ISSB on technical matters throughout its standard-setting process. Further information on the TAC’s role is provided in Section A, paragraphs 9 to 13 and in its ToR (Section B). In addition, the UK government, the FCA, the Bank of England, the Financial Reporting Council (FRC) and the UK Endorsement Board (UKEB) will play an active role in influencing the ISSB from the perspective of their respective organisational remits and priorities.

6․ The UK government also recognises the importance of international standards catering to the needs of countries at all stages of economic development. To be truly successful, IFRS Sustainability Disclosure Standards need to support developing and emerging economies’ ability to attract finance. The ISSB has an important role to play to develop capacity within emerging and developing economies so that companies in all jurisdictions can reap the full benefits of IFRS Sustainability Disclosure Standards. The UK government is keen to support this work and welcomes the establishment of the ISSB’s Partnership Framework for capacity building.

b) The endorsement of IFRS Sustainability Disclosure Standards, resulting in the creation of UK Sustainability Reporting Standards, by the Secretary of State

7․ Following the publication of IFRS Sustainability Disclosure Standards, the next phase of work is an ‘endorsement’ process that will result, subject to positive endorsement decisions, in the creation of UK Sustainability Reporting Standards which will form the basis of any future implementation decisions (see Section A, paragraphs 16 to 18). Each Standard issued by the ISSB would require analysis and assessment to determine its appropriateness for use within a UK context, prior to an endorsement decision. A final endorsement decision will be made by the Secretary of State, who holds ultimate responsibility for endorsing with or without amendments, or not to endorse. The ‘endorsement’ of IFRS Sustainability Disclosure Standards does not mean that companies will automatically be obliged to use the resulting UK Sustainability Reporting Standards, although they may choose to do so voluntarily.

8․ When making an endorsement decision, the Secretary of State may consider a wide range of factors, including whether use of the standards in the UK is conducive to economic growth, whether they support the UK’s international competitiveness, and the extent to which they will inform investor decision-making, among other things.

9․ To reach a decision, the Secretary of State will be provided with advice and recommendations by the TAC, who will be tasked with providing a rigorous technical analysis of the standards issued by the ISSB and providing clear, well-reasoned and evidence-based recommendations accordingly. Overall, the TAC’s work will assess whether endorsing a IFRS Sustainability Disclosure Standard, to create a UK Sustainability Reporting Standard, would be conducive to the long-term public good in the UK. In doing so, the TAC’s technical analysis will be used to advise the Secretary of State whether:

• use of the IFRS Sustainability Disclosure Standard is likely to result in an improvement in the international comparability of sustainability-related reporting in the UK

• use of the IFRS Sustainability Disclosure Standard is likely to support companies in making disclosures that are understandable, relevant, reliable and comparable

• use of the IFRS Sustainability Disclosure Standard is likely to improve the quality of corporate reporting within the UK in the long-term

• companies are likely to be able to provide the disclosures required by the IFRS Sustainability Disclosure Standard within the timeframes that a company normally reports without undue cost or effort

10․ To advise the Secretary of State on these matters, the TAC will conduct outreach to understand the views of UK stakeholders. Any written responses to a call for evidence or consultation published by the TAC will be made publicly available, subject to any requests for a response to remain confidential. The TAC will also hold public meetings when conducting their analysis of IFRS Sustainability Disclosure Standards, subject to the exceptions specified in Section B.

11․ In addition to the TAC’s recommendations, DBT will also provide advice to the Secretary of State, following discussions with the PIC, on whether:

e) Use of the IFRS Sustainability Disclosure Standard is likely to be conducive to the UK’s economic growth and international competitiveness, taking into account the costs and benefits of compliance.

f) The IFRS Sustainability Disclosure Standard is likely to be coherent with, and suitable for inclusion in, UK domestic legislation and regulation^{[footnote 5]}.

12․ The TAC may also provide advice on the matters in Section A, paragraph 11, but is not required to do so.

13․ When providing recommendations and advice on the matters described in Section A, paragraphs 9 and 11, the TAC and DBT may also provide recommendations regarding possible amendments that the Secretary of State could make, including insertions and deletions, when endorsing a IFRS Sustainability Disclosure Standard for use within a UK context. The UK government is keen to avoid modifications to the requirements contained within IFRS Sustainability Disclosure Standards, as global comparability is essential to delivering decision-useful information for users of general-purpose financial accounts. As a consequence, the TAC and DBT will only propose amendments to a IFRS Sustainability Disclosure Standard if:

• changes are considered necessary for the effective application of the IFRS Sustainability Disclosure Standard within a UK context.

• there is a failure to amend a IFRS Sustainability Disclosure Standard would be of detriment to the long-term public good in the UK, taking into consideration the matters in Section A, paragraphs 9 (TAC) and 11 (DBT)

• changes are desirable, to build upon the material provided within the global baseline provided by a IFRS Sustainability Disclosure Standard^{[footnote 6]}

14․ After consideration of the recommendations and advice provided by the TAC and DBT, the Secretary of State will decide on a draft UK Sustainability Reporting Standard which will be published for public consultation. This consultation will be accompanied by an analysis of the costs and benefits, performed by DBT. Among other things, this analysis will consider the effect that any proposed amendments to the original IFRS Sustainability Disclosure Standard have on international comparability. A response to this consultation will be published on GOV.UK.

15․ Following the consultation, the Secretary of State will take a final endorsement decision on whether to create a UK Sustainability Reporting Standard. Responsibility for final endorsement decisions and any amendments will rest with the Secretary of State who will be guided, but not constrained by, recommendations and advice from the TAC and DBT. DBT will be responsible for the final drafting of a UK Sustainability Reporting Standard.

Diagram A – Endorsement process, leading to UK Sustainability Reporting Standards

c) Implementation of UK Sustainability Reporting Standards through UK legislation and the FCA’s rules for listed companies

16․ Once the Secretary of State has finalised UK Sustainability Reporting Standards through the endorsement process, the final phase of work involves ‘implementation’. This phase of work could include:

• the introduction of exemptions from existing requirements that could be provided to companies that are required to use UK Sustainability Reporting Standards, or choose to do so on a voluntary basis
• the introduction of any disclosure requirements for companies to report using UK Sustainability Reporting Standards
• decisions regarding the size and type of companies that might be subject to future requirements to report using UK Sustainability Reporting Standards
• decisions regarding the timetable for introducing future requirements and exemptions

17․ The UK government and the FCA each hold powers to make implementation decisions of the sort already described. The UK government has the ability to introduce disclosure requirements through the introduction of new legislation: these requirements would require parliamentary approval, which would be sought following a public consultation and the production of an impact assessment by DBT. Meanwhile, the FCA has powers to introduce disclosure requirements on relevant companies under the Financial Services and Markets Act 2000, subject to the consultative requirements placed upon it by that act.

18․ When making implementation decisions, the UK government and the FCA will work closely together to ensure consistency with UK government priorities and coherence across the UK’s reporting landscape, and will consider how implementation decisions might impact on growth, the UK’s competitiveness and the quality of information available to capital markets, among other things. To assist with this process, the UK government has established the PIC, the membership of which will consist of UK government departments, UK regulators and UK standard setters. The primary function of the PIC is to co-ordinate implementation decisions, but it will also be a forum to:

• ensure DBT is provided with additional relevant information when developing endorsement advice on a IFRS Sustainability Disclosure Standard, for the Secretary of State
• ensure DBT is able to provide relevant contextual information to the TAC concerning the endorsement of a IFRS Sustainability Disclosure Standard

19․ Further detail on the PIC’s function, membership and working arrangements can be found in its ToR (Section C).

20․ Finally, the UK government is aware that companies, and professional and business service providers will need time to familiarise themselves with new requirements, and to amend their resource and processes appropriately. When making implementation decisions, the UK government and the FCA will therefore provide the market with sufficient notice before any future changes come into force.

Section B: UK Sustainability Disclosure TAC Terms of Reference

1․ This section explains the TAC’s function and remit, details regarding its membership, the provision of its secretariat, requirements for its technical endorsement recommendations and its meeting organisation.

Function and remit of the TAC

2․ As described in Section A, paragraph 9, the TAC is to conduct a rigorous technical analysis of the IFRS Sustainability Disclosure Standards and provide well-reasoned, clear and evidence-based advice to the Secretary of State accordingly. In particular, the TAC’s analysis should be used to provide a recommendation to the Secretary of State on whether the endorsement of a IFRS Sustainability Disclosure Standard would be conducive to the long-term public good in the UK, including whether:

• use of the IFRS Sustainability Disclosure Standard is likely to result in an improvement in the international comparability of sustainability-related reporting in the UK

• use of the IFRS Sustainability Disclosure Standard is likely to support companies in making disclosures that are understandable, relevant, reliable and comparable

• use of the IFRS Sustainability Disclosure Standard is likely to improve the quality of corporate reporting within the UK in the long-term

• companies are likely to be able to provide the disclosures required by the IFRS Sustainability Disclosure Standard within the timeframes that a company normally reports without undue cost or effort

3․ The TAC may also provide recommendations on whether^{[footnote 7]}:

• use of the IFRS Sustainability Disclosure Standard is likely to be conducive to the UK’s economic growth and international competitiveness, taking into account the costs and benefits of compliance.

• the IFRS Sustainability Disclosure Standard is likely to be coherent with, and suitable for inclusion in, UK domestic legislation and regulation^{[footnote 8]}

4․ As described in Section A, paragraph 13, the TAC may recommend whether, in light of its assessment, amendments are necessary before the IFRS Sustainability Disclosure Standard can be endorsed, or whether amendments to other legislative or regulatory provisions in the UK framework may be required. The TAC may propose amendments if:

• changes are considered necessary for the effective application of the IFRS Sustainability Disclosure Standard within a UK context
• there is a failure to amend a IFRS Sustainability Disclosure Standard and this would be of detriment to the long-term public good in the UK, taking into consideration the matters in Section B, paragraph 2

5․ The TAC may also propose amendments to build upon the material provided within the global baseline provided by a IFRS Sustainability Disclosure Standard, upon request from DBT or where UK stakeholders raise a strong need.

6․ In addition to the responsibilities already described, the TAC also has responsibility to undertake outreach with, and provide a focal point for, UK stakeholders to influence the technical development of IFRS Sustainability Disclosure Standards. This includes the way the ISSB develops its future standards and the ISSB’s choices to amend or produce guidance on existing standards^{[footnote 9]}.

7․ Finally, the TAC may be commissioned by DBT to provide supplementary advice and analysis to support endorsement or implementation decisions by DBT or FCA. For instance, this could involve providing information relating to the expected costs and benefits involved for companies in implementing systems and complying with aspects of UK Sustainability Reporting Standards. This information would be used by DBT or the FCA when conducting the analysis of costs and benefits or impact assessments necessary for endorsement or implementation decisions. It could also involve providing advice on the implications of adopting certain company size thresholds to any disclosure requirements imposed by the Secretary of State or the FCA.

Commencement of work to develop endorsement recommendations

8․ The TAC will begin work to develop endorsement recommendations once a new IFRS Sustainability Disclosure Standard has been published and once a ministerial letter from DBT has been sent to the TAC to commission it to initiate work on the standard. The TAC cannot begin its analysis of a IFRS Sustainability Disclosure Standard before it has received this letter, but the absence of a letter does not preclude the TAC from conducting influencing and preparatory work prior to and during the ISSB’s development of a standard.

Process that must be undergone prior to providing endorsement recommendations

9․ The TAC must undertake stakeholder outreach, including with companies and investors, as well as the ISSB, national standard setters and securities regulators as is necessary for it to provide informed recommendations to DBT. The TAC must also consider whether it is necessary to publish a call for evidence, following publication of a new IFRS Sustainability Disclosure Standard.

Contextual information and provision of further advice

10․ DBT may, at any time, provide the TAC with contextual information concerning:

• additional matters, which the Secretary of State is likely to take into account when making an endorsement decision on a IFRS Sustainability Disclosure Standard

• information provided by members of the PIC regarding the impact of endorsement of a IFRS Sustainability Disclosure Standard on matters within their organisation’s remit

The TAC must have regard to this information when making its recommendations on the endorsement of a standard to DBT.

11․ DBT may provide the TAC with a target date for an endorsement recommendation to be provided. Although this target is not binding, the TAC must aim to provide an endorsement recommendation by that date on a best-efforts basis.

12․ DBT may also commission the TAC to provide further advice or information on a IFRS Sustainability Disclosure Standard, before or after it has issued its recommendations. In addition, the TAC will be given the opportunity to amend its recommendations before advice is submitted to the Secretary of State by DBT following analysis of the responses received from the DBT consultation referred to in Section A, paragraph 14. However, the TAC’s endorsement recommendations are independent, and the Secretary of State or DBT cannot require the TAC to change its recommendations.

13․ DBT may also commission the TAC for advice or analysis to support implementation decisions being taken by DBT or the FCA against UK Sustainability Reporting Standards. As described in Section B, paragraph 7, such commissions are likely to focus on matters relating to the costs and benefits involved for companies in adhering to aspects of a UK Sustainability Reporting Standard. The TAC will not be asked to produce a full impact assessment for any implementation decision, as this is the responsibility of DBT and the FCA.

Membership

14․ Membership of the TAC will consist of between 11 and 15 members, including the chair, each of whom will be an expert in one of the following categories. The categories ensure that membership represents those with an interest in, and familiarity with, sustainability reporting. Two places on the TAC are reserved for a FRC member and a UKEB member to reflect the connectivity between UK-adopted international accounting standards, UK Generally Accepted Accounting Principles (GAAP) and UK Sustainability Reporting Standards.

Category	Appointment process
Chair	Appointed by the Secretary of State following an open and transparent recruitment process[footnote 10].
Academics
Accounting, audit and assurance providers
Economists
Investors and other users of sustainability reports
Preparers of sustainability reports
Analysts of sustainability information
FRC member	Appointed by the Executive Director of Regulatory Standards, with the agreement of the FRC Executive Committee.
UKEB member	Appointed by the UKEB chair.
Observers with speaking rights: Bank of England, DBT, FCA

15․ Except for the FRC and UKEB members, members will be appointed in their personal capacities, independently of their organisations. However, where TAC members are part of other organisations, the views of these organisations, and the reasons for these views, may inform the TAC’s debate. Terms for TAC members will vary according to the TAC’s workplan and any IFRS Sustainability Disclosure Standards it is working on or is due to work on. Members are required to declare any relevant conflicts of interest to the chair, the Secretary of State and to FRC.

16․ The chair will be appointed by the Secretary of State, for a term of 3 years, which may be renewed once for a further term of 3 years. In exceptional circumstances, including where a chair appointment is yet to be made, the Secretary of State may designate a chair of the TAC until a full appointment is made. All other members, except for the FRC and UKEB members, will be appointed by the Secretary of State for a term of between 1 and 3 years, which may be renewed once for a further term of between 1 and 3 years. Given that the FRC member and the UKEB member will represent the views of their respective organisations, each will be appointed by their organisation. Specifically, the FRC member will be appointed by the Executive Director of Regulatory Standards, with the agreement of the FRC Executive Committee. The UKEB member will be appointed by the UKEB chair.

17․ Should the FRC or UKEB members’ employment with, or appointment to, the FRC or UKEB end, their appointment to the TAC will also end.

18․ When appointing members, the Secretary of State, and FRC or UKEB when relevant, will ensure that each member they are responsible for appointing has a good understanding and knowledge of the UK’s non-financial reporting framework, the FCA’s rules for listed companies and the work of the ISSB. Other expertise will vary according to the specialism of the particular member.

19․ The Secretary of State will seek to ensure that the TAC has a wide range of experience and skills, from a range of backgrounds.

20․ With the exception of the chair, members will not be remunerated. Members will be entitled to claim travel, subsistence and other reasonable expenses incurred solely for the purpose of fulfilling their duties as a member of the TAC and incurred in accordance with the FRC’s Travel and Expenses policy.

21․ In addition to the observers listed in the membership categories, further observers with speaking rights may attend TAC meetings at the discretion of the chair.

22․ A member’s appointment to the TAC can be terminated by their appointing body if that member’s conduct has, or may, bring the TAC into disrepute.

Roles and responsibilities

Roles and responsibilities of all TAC members

23․ TAC members, in the performance of their roles, are responsible for:

• providing specialist knowledge, insight and technical analysis on a IFRS Sustainability Disclosure Standard, as relevant to their area of expertise
• voting on the final technical endorsement recommendation(s) or advice
• reviewing all relevant material before each TAC meeting
• contributing towards papers for discussion at the TAC’s meetings, when needed
• contributing towards the drafting of the TAC’s endorsement recommendation or advice, when needed
• participating in the TAC’s influencing work with the ISSB, as delegated by the chair.
• being open and considerate to the views of other members and remaining respectful during interactions with others
• ensuring compliance with the 7 Principles of Public Life^{[footnote 11]}
• except for the chair, reporting actual or potential conflicts of interest to the chair, the Secretary of State and FRC

Roles and responsibilities of the chair

24․ The TAC chair is responsible for:

• ensuring the TAC considers all matters in Section B, paragraph 2 when deliberating on a IFRS Sustainability Disclosure Standard, and ensuring that the TAC’s endorsement recommendation reflects those deliberations
• ensuring that the TAC’s recommendations to the Secretary of State are accompanied by a rigorous, well-reasoned justification for those recommendations and are based on a detailed technical analysis of relevant IFRS Sustainability Disclosure Standard(s)
• ensuring the TAC has regard to any contextual information provided by DBT related to the Secretary of State’s decision-making on the endorsement of a standard
• making best efforts to ensure that the TAC’s endorsement recommendation and any further advice, is provided by any target date specified. If the chair considers that this is not feasible, they should inform DBT as soon as possible
• acting as the lead contact for the relationship with the Secretary of State and DBT
• leading the TAC’s engagement and influencing work, in particular with companies, investors, the ISSB, other national standard setters and securities regulators
• delegating aspects of the engagement or influencing work to the TAC secretariat – the chair may also delegate influencing work with the ISSB to other TAC members
• upon request, reporting to DBT on progress with the preparation of the TAC’s endorsement recommendations, further advice, or any engagement and influencing activities
• ensuring the PIC is briefed on the TAC’s engagement with, and influencing of, the ISSB, and co-ordinating engagement and influencing efforts with UK government departments, UK regulators and standard setters where interests overlap
• promoting discussion and, when TAC members disagree, efforts to compromise and to come to a consensus
• commissioning work or analysis from secretariat staff
• requesting that the FCA, FRC or the UKEB table papers, or provide input into TAC secretariat papers, for TAC meetings, where relevant to their expertise and remit – requests should be made with as much notice as possible and must be agreed with FCA, FRC or UKEB respectively
• agreeing TAC meeting agenda items and papers
• reporting actual or potential conflicts of interest to the Secretary of State and FRC

Voting and endorsement recommendation to DBT

25․ TAC members must vote on the TAC’s endorsement recommendation in a TAC meeting. Prior to this, TAC members must also vote on whether to incorporate any amendment to a IFRS Sustainability Disclosure Standard within its endorsement recommendation to DBT within a TAC meeting (see requirements for meetings in Section B, paragraph 32). Recommendations for the endorsement of a IFRS Sustainability Disclosure Standard, or the inclusion of an amendment to a IFRS Sustainability Disclosure Standard, must be made by a simple majority of members present at the meeting (‘the threshold’).

26․ Where the TAC has been unable to reach the threshold for an endorsement recommendation, and where in the opinion of the chair, the TAC will not be able to reach the threshold prior to any target date for a recommendation, the chair must inform DBT. DBT may grant additional time for the TAC to provide an endorsement recommendation. If DBT does not grant additional time, the TAC must provide advice to DBT in accordance with Section B, paragraphs 27 and 28.

Provision of endorsement recommendations and further advice or information

27․ The TAC must provide its endorsement recommendation to DBT in a written report which sets out the result of the final vote, and whether and why the proposed UK Sustainability Reporting Standard would be conducive to the long-term public good in the UK, including how the TAC has considered the matters in Section B, paragraph 2. In each case, the TAC should include reasons for any proposed amendments to the IFRS Sustainability Disclosure Standard and any dissenting views of members. DBT will submit the TAC’s endorsement recommendation to the Secretary of State alongside advice from DBT.

28․ Where the TAC is unable to reach the threshold on endorsement recommendations, it should provide endorsement advice to DBT which sets out the differing views of the TAC members.

29․ Further advice or information will also be submitted to the Secretary of State alongside advice from DBT.

Secretariat

30․ The secretariat will be provided by FRC. The secretariat will:

• schedule meetings of the TAC and source a suitable venue to facilitate in person attendance (when possible), broadcast and recording of meetings – meetings should be scheduled at least 10 working days in advance, except in exceptional circumstances
• draft agendas and papers, collaborating with TAC members where necessary – these should be circulated to members at least 5 working days in advance of meetings, except in exceptional circumstances as determined by the chair
• take a summary note of TAC meetings
• at the request of the chair, undertake engagement with and influencing of the ISSB, engagement with other national standard-setters and engagement and outreach with other stakeholder communities
• lead the drafting of the TAC’s endorsement recommendations or any other advice

31․ Although papers will primarily be prepared by the TAC’s secretariat, the chair may request that the FCA, FRC or the UKEB table papers, or provide input into TAC secretariat papers, for TAC meetings where relevant to their expertise and remit, and subject to agreement with each respective organisation.

Requirements for meetings

32․ There must be a minimum of 11 members appointed for the TAC to hold meetings. There is no requirement for these members to represent all categories in Section B, paragraph 14. The quorum for TAC meetings is two thirds of appointed members to be present in person or in virtual attendance.

33․ If the chair is unexpectedly unable to attend a meeting, and it is not possible to rearrange the meeting, the chair must nominate a TAC member to chair the meeting.

34․ Meetings will be held in-person when possible, with virtual attendance permitted. Meetings may be held virtually when an appropriate venue is not available.

35․ Meetings are generally expected to be held on a monthly basis but the frequency may vary depending on the TAC’s workplan.

36․ Meetings should be held in public – available for live viewing online – and recordings of these meetings will be made available on the FRC’s website within 5 working days. However, at the discretion of the chair, the TAC may hold certain discussions in private, or in the presence of invited observers with speaking rights, when discussion involves confidential or administrative matters. The TAC must explain the reasons for holding any discussions in private.

37․ When a member appointed by the Secretary of State has not attended 2 consecutive meetings, the Secretary of State reserves the right to terminate their appointment.

Transparency

38․ Agendas for public meetings must be published on the FRC’s website prior to the meeting.

39․ Papers for public meetings must be published on the FRC’s website prior to the meeting.

40․ The summary note of public TAC meetings must be published on the FRC’s website no more than 10 working days after the meeting. The summary note must be approved by the TAC chair and it should include an overview of matters discussed, key points raised, key decisions and next steps.

41․ Except where information has been provided to DBT in confidence by a third party, all contextual information, target dates and commissions from DBT will be published on GOV.UK or the FRC website to ensure transparency and clarity relating to the TAC’s role.

42․ The TAC’s written report containing its endorsement recommendations, as well as any further advice or information provided by the TAC in response to DBT commissions, will also be published on GOV.UK or the FRC website.

Due process

43․ The TAC must determine its due process policy within 12 months following the approval of this ToR. Once the due process policy has been approved, the TAC must report on compliance with the policy to DBT once in every calendar year.

Section C: UK Sustainability Disclosure PIC Terms of Reference

1․ This section sets out the PIC’s function and remit, details regarding its membership, the provision of its secretariat, and its ways of working.

Function and remit of the PIC

2․ As explained in Section A, paragraph 18, the primary function of the PIC is to coordinate implementation of UK Sustainability Reporting Standards by the UK government and under the FCA’s rules for listed companies. This could include the creation of disclosure requirements, exemptions from disclosure requirements, location of reporting, connectivity between UK Sustainability Reporting Standards and UK-adopted international accounting standards or UK GAAP, and assurance. The PIC will act as a forum to ensure coordinated implementation across the UK government and UK financial regulators and standard setters. This forum will focus on a wide range of matters when considering implementation, including whether implementation decisions are conducive to the UK’s growth, support the UK’s international competitiveness and provide high-quality information to investors.

3․ The PIC will also be used as an information-sharing forum for UK government and UK financial regulators and standard setters to share information regarding their engagement and influencing work with the ISSB. It is expected that each member will engage with the ISSB on matters relating to their organisation’s remit and priorities. The PIC allows for information to be shared where there is an overlap of interests in engagement and influencing work.

4․ The PIC’s use as an information-sharing forum will also ensure DBT is able to obtain relevant information for providing advice to the Secretary of State regarding the endorsement of IFRS Sustainability Disclosure Standards. In particular, the PIC may help DBT to advise the Secretary of State on the matters described in Section A, paragraph 11. These are:

• whether use of the IFRS Sustainability Disclosure Standard is likely to be conducive to the UK’s economic growth and international competitiveness, taking into account the costs and benefits of compliance
• whether the IFRS Sustainability Disclosure Standard is likely to be coherent with, and suitable for inclusion in, UK domestic legislation and regulation^{[footnote 12]}

5․ Lastly, the PIC’s use as an information-sharing forum will also allow the UK government and UK financial regulators and standard setters to provide DBT with information on the impact of endorsing a IFRS Sustainability Disclosure Standard on their organisation’s remit.

Membership of the PIC

6․ The PIC will be chaired by a DBT senior civil servant (SCS) and its membership will consist of representatives from UK government departments, UK financial regulators and UK standard setters. In approving these ToR, the Secretary of State has agreed that the PIC’s membership will consist of representatives from the following organisations:

Organisation	Role on the PIC
Department for Business and Trade (DBT) – chair	The Secretary of State for Business and Trade has responsibility for endorsing IFRS Sustainability Disclosure Standards to create UK Sustainability Reporting Standards. Lead UK government department for Companies Act 2006 corporate disclosure requirements.
HM Treasury (HMT)	UK government’s economic and finance ministry, lead UK government department on the UK Sustainability Disclosure Requirements framework.
Department for Energy Security and Net Zero (DESNZ)	Lead UK government department on UK Net Zero and Green Finance.
Department for Environment, Food and Rural Affairs (Defra)	Lead UK government department on environmental matters.
Department for Work and Pensions (DWP)	Lead UK government department on Pensions Act 1995 requirements for pension schemes.
Bank of England (BoE)	Prudential regulator for the largest financial services firms in the UK. It is also the UK’s central bank, with the objective to maintain price stability and, subject to that, to support the economic policy of the UK government, and has a mandate to protect and enhance the stability of the financial system of the UK.
Financial Conduct Authority (FCA)	The FCA is the UK’s securities and conduct regulator. The FCA sets rules for listed companies and also holds powers to make and enforce rules governing the conduct of UK regulated firms and market participants.
Financial Reporting Council (FRC)	UK regulator of auditors, accountants and actuaries, and the UK body that issues corporate reporting, audit, assurance, and actuarial standards and guidance, and sets the UK’s Corporate Governance and Stewardship Codes, and ethical standards. Responsible for providing information on any connectivity matters between IFRS Sustainability Disclosure Standards or UK Sustainability Reporting Standards and UK GAAP.
UK Endorsement Board (UKEB)	UK national standard setter responsible for influencing, endorsing and adopting new or amended international accounting standards, issued by the IASB, for use by UK companies. Responsible for providing information on any connectivity matters between IFRS Sustainability Disclosure Standards or UK Sustainability Reporting Standards and UK-adopted international accounting standards.
Other UK government departments and regulators where necessary

7․ Officials from other UK government departments, UK regulators or UK standard setters may attend PIC meetings as observers with prior approval from the chair.

8․ Members may declare a ‘nil interest’ in an agenda item, and withdraw from discussions under that item, where they consider that the matter under discussion does not overlap with their organisation’s remit.

Responsibilities of the PIC chair

9․ The PIC chair is responsible for:

• sharing information regarding DBT’s plans for the implementation of UK Sustainability Reporting Standards in UK legislation
• convening the PIC where, in the chair’s view, it is necessary to discuss the implementation of UK Sustainability Reporting Standards, or discussions with the ISSB or other stakeholders
• seeking views from the PIC on the endorsement of a IFRS Sustainability Disclosure Standard, in particular in relation to the matters in Section A, paragraph 11, and reflecting the outcome of PIC discussions on these matters in DBT advice to the Secretary of State
• providing any relevant contextual information to the TAC regarding the endorsement of a IFRS Sustainability Disclosure Standard, following discussion with the PIC
• commissioning work or analysis from PIC members and the secretariat
• agreeing PIC meeting agenda items and papers
• agreeing a summary note of PIC meetings for publication on GOV.UK
• adhering to the requirements on confidentiality and transparency in Section C, paragraphs 16 to 19

Responsibilities of all PIC members

10․ PIC members, in the performance of their roles, are responsible for:

• raising matters concerning the implementation of UK Sustainability Reporting Standards, that are likely to be of interest to the other members, with the PIC
• reporting discussions regarding IFRS Sustainability Disclosure Standards or UK Sustainability Reporting Standards with the ISSB and other stakeholders, which are likely to be of interest to other members of the PIC, to the extent possible
• providing information to assist DBT’s preparation of advice to the Secretary of State on endorsement of a IFRS Sustainability Disclosure Standard, in particular in relation to the matters described in Section A, paragraph 11
• providing information on the impact of endorsing a IFRS Sustainability Disclosure Standard on their organisation’s remit
• preparing or contributing towards papers for discussion at the PIC’s meetings
• reviewing all relevant material before all meetings
• adhering to the requirements on confidentiality and transparency in Section C, paragraphs 16 and 17

Secretariat

11․ The secretariat will be provided by DBT. The secretariat’s functions are to:

• schedule meetings of the PIC and source a suitable venue to facilitate in person attendance when possible – meetings should be scheduled at least 10 working days in advance, except in exceptional circumstances
• draft agendas and papers, collaborating with PIC members where necessary. These should be circulated by email to members at least 5 working days in advance of meetings, except in exceptional circumstances
• take a summary note of PIC meetings

Meeting organisation

12․ Meetings will be held in private to facilitate discussion on confidential policy development matters.

13․ Meetings will be held in a hybrid format where possible, with both virtual and in person attendance permitted. However, meetings may be held virtually where an appropriate venue cannot be sourced.

14․ Meetings are expected to be held on approximately a monthly basis. However, this regularity may be reassessed as work progresses.

15․ There is no quorum for meetings.

Confidentiality and transparency

16․ PIC members are expected to keep PIC discussions confidential, given that they may relate to the ongoing development of UK government and other public policy.

17․ Papers, as well as detailed meeting notes, will not be shared outside member organisations, unless approved by the chair.

18․ A summary note of PIC meetings will be published on GOV.UK no more than 10 working days after a meeting and following circulation amongst PIC members.

19․ The summary note will include a summary of discussions relating to endorsement of a IFRS Sustainability Disclosure Standard, as well as any other matters discussed in a PIC meeting at the discretion of the chair.

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1. Within this document, ‘IFRS Sustainability Disclosure Standards’ includes any new IFRS Sustainability Disclosure Standards and amendments to existing IFRS Sustainability Disclosure Standards. ↩

2. This could also include non-company entities such as Limited Liability Partnerships (LLPs) or Building Societies. ↩

3. https://www.ifrs.org/groups/international-sustainability-standards-board/ ↩

4. https://www.ifrs.org/groups/due-process-oversight-committee/ ↩

5. Noting that other legislation, standards, regulations, metrics, guidance and initiatives provisions may be adapted to accommodate the standard. ↩

6. The TAC may only propose amendments under this condition upon request from DBT or where UK stakeholders raise a strong need. ↩

7. DBT is responsible for advising the Secretary of State on matters relating to paragraph 3a and 3b. The TAC may provide advice on this matter but is not required to. ↩

8. Noting that other legislation, standards, regulations, metrics, guidance and initiatives provisions may be adapted to accommodate the standard. ↩

9. Influencing will be conducted alongside UK government, UK regulators and UK standard setters where interests overlap. ↩

10. An interim chair may also be directly appointed by the Secretary of State for a maximum of 18 months. ↩

11. Selflessness, integrity, objectivity, accountability, openness, honesty, and leadership. ↩

12. Noting that other legislation, standards, regulations, metrics, guidance and initiatives provisions may be adapted to accommodate the standard. ↩