JR application on climate-risk disclosure fails

The High Court has refused an application by ClientEarth for permission to apply for judicial review of FCA’s approval of Ithaca Energy plc’s prospectus. The Court said it could not be argued that the prospectus failed properly to disclose Ithaca’s climate-related financial risks and the UK Prospectus Regulation did not impose any separate requirement for it to disclose its assessment of risk and materiality.

FCA had looked at how the prospectus covered risks to the issuer’s business and securities arising from climate-related factors and was satisfied the prospectus complied with the Prospectus Regulation. ClientEarth could not show that FCA had acted irrationally (which it would have needed to do), even though it disagreed with FCA’s assessment.

FCA initially approved the prospectus in October 2022. When FCA approves prospectuses, it does not publish reasoned decisions. ClientEarth raised concerns with FCA after the initial approval, which led to FCA disclosing the concerns to Ithaca and to a revised and final version of the prospectus.

ClientEarth alleged that FCA:

  • erred in law by approving the prospectus when it did not disclose, or describe adequately, Ithaca’s assessment of the materiality of its climate-related financial risks;
  • erred in law by approving the prospectus when it did not disclose, or describe adequately, the specificity of the climate-related risks associated with Ithaca’s securities; and
  • could not rationally sustain its conclusion that the prospectus contained all necessary information material to an investor making an informed assessment of Ithaca’s financial position and prospects.

ClientEarth was allowed to pursue the claim on a public interest basis.

On the first two grounds, the judge said these were unarguable and had no realistic prospect of success. FCA’s duty was to be satisfied the prospectus contains the information required by the Prospectus Regulation (and relevant other FSMA provisions), and so its decision to do so could be challenged only on public law grounds. These grounds would be that it had either misdirected itself on the meaning of the relevant law, failed to take relevant considerations into account, or acted irrationally. The judge said FCA’s interpretation of Article 16(1) was “plainly correct on a natural reading” and that it would not substitute its view or that of the claimant for FCA’s considered judgment.

The judge reached the same conclusion on the third ground. The prospectus had identified the Paris Agreement as a material risk for the business and the prospectus referred to the different views of Ithaca and ClientEarth on its compatibility with the Paris Agreement. FCA had listed the ways in which the prospectus addressed the risks to Ithaca’s business and securities and was satisfied the prospectus was compliant. The judge said that although ClientEarth disagreed with FCA’s conclusion, it did “not come close” to showing that FCA had acted irrationally.


Emma Radmore