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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United Kingdom | Publication | novembre 2021
On November 3, 2021 the Government published its response following a consultation in July and August 2021 on the draft statement that the Secretary of State must lay before Parliament for the purposes of section 3 National Security and Investment Act 2021 (NSI Act and Statement). The Statement is required by the NSI Act to be laid before Parliament and published before the Secretary of State can use the call-in power provided by the NSI Act (i.e. the power to call-in a transaction for a full assessment where there is a reasonable suspicion of a possible risk to national security either: (i) after BEIS’s initial review of a transaction that has been notified; or (ii) where a transaction has not been notified). The Statement is intended to help parties to acquisitions to determine whether their acquisition is likely to be called in, so helping parties to plan their acquisitions more easily and, for acquisitions outside the mandatory notification system, to decide whether to submit a voluntary notification.
The Government notes that responses to the consultation tended to ask for additional detail on decision-making processes in the NSI system. For example, what does “closely linked” mean in the context of acquisitions made in areas “closely linked” to the mandatory notification sectors? Some sought clarity on where the Government appears to have discretion in its decisions, with some stating that language such as “may be likely to…” did not give enough certainty to businesses about whether the Government would take action in some situations. Several respondents thought that the Statement went beyond national security by referring to “economic prosperity” and since the Government is explicit that the NSI regime is solely for national security purposes and will not be used to further economic or competition objectives, this is now reflected in the Statement.
Following the feedback, the Government has made changes to the Statement although it has maintained the general direction and narrative of the Statement as consulted upon. In terms of particular questions asked, the following should be noted:
On November 1, 2021 the Government announced that it would back a new five-year review to monitor women’s representation in the upper rungs of FTSE companies, namely The FTSE Women Leaders Review, and encourage firms to open up opportunities to everyone. New leadership is currently being appointed to steer the review, and take forward new targets over the coming years.
The FTSE Women Leaders Review Portal has been opened for all FTSE 350 companies to submit their Women in Leadership gender data from November 1 until November 30, 2021. The next full annual report on the progress of FTSE 350 boards and their leadership teams will be published in February 2022.
On November 3, 2021 the Financial Conduct Authority (FCA) published its environmental, social and governance (ESG) strategy which sets out the FCA’s target outcomes and the actions the FCA expects to take to deliver these. The FCA’s aim is to support the financial sector in driving positive change, including the transition to net zero.
The FCA’s work is based on five core themes:For each of these themes, the FCA provides details of the key actions it is currently undertaking or intends to undertake in the near future, as well as interim milestones in the coming period. The FCA will monitor progress against its commitments and measure the success of its interventions, with interim updates provided as part of its Business Plan and Annual Report in 2022, with a more detailed stock-take on progress in 2023.
(FCA: A strategy for positive change – Our ESG priorities, 03.11.2021)
On November 3, 2021 HM Treasury published a Fact Sheet in which it announced that the UK will be the world’s first net zero-aligned Financial Centre, with UK financial institutions being required to have a robust firm-level transition plan setting out how they will decarbonise as the UK meets its net zero targets.
There will be strong Government oversight of the financial sector as a whole to ensure financial flows actually shift towards supporting net zero and the UK will move towards making publication of transition plans mandatory. Initially, this will require asset managers, regulated asset owners and listed companies to publish transition plans that consider the Government’s net zero commitment or provide an explanation if they have not done so. As standards for transition plans emerge, the Government and regulators will take steps to incorporate these into the UK’s Sustainability Disclosure Requirements and strengthen requirements to encourage consistency in published plans and increased adoption by 2023. The Government intends to legislate to deliver this.
The Fact Sheet notes that a transition plan sets out how an organisation will adapt as the world transitions towards a low carbon economy. The Government believes it should set out
The Fact Sheet notes that the FCA has proposed to reference this in its TCFD-aligned disclosure rules for listed companies, asset managers and FCA-regulated asset owners with effect from January 1, 2022.
(HM Treasury: Fact Sheet – Net zero-aligned Financial Centre, 03.11.2021)
On November 3, 2021 the IFRS Foundation Trustees announced three developments to provide the global financial markets with high-quality disclosures on climate and other sustainability issues.
These developments are as follows:
The ISSB will develop IFRS Sustainability Disclosure Standards, including disclosure requirements that address companies’ impacts on sustainability matters relevant to assessing enterprise value and making investment decisions. The aim of this is to ensure that the ISSB’s Standards will enable companies to provide comprehensive sustainability information for the global financial markets. The Standards will be developed to facilitate compatibility with requirements that are jurisdiction specific or aimed at a wider group of stakeholders. The ISSB will build on the work of existing investor-focused reporting initiatives to become the global standard-setter for sustainability disclosures for the financial markets.
The ISSB’s work is expected to commence shortly and to begin with public consultations to inform the ISSB’s work plan and on proposals informed by recommendations from the TRWG. Following these consultations, the ISSB will lead public discussions of feedback received to the consultations and possible improvements to the proposals prior to their finalisation as Standards.
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