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ClientEarth fails in judicial review against FCA


ClientEarth, an environmental charity that seeks to bring legal challenges in respect of entities that it considers have not discharged their environmental responsibilities, has failed in its bid to secure a judicial review of the FCA’s decision to approve the prospectus of a UK oil and gas company, Ithaca Energy plc (Ithaca). Ithaca’s flotation was the UK’s largest public listing of 2022.

The registration documentation relating to Ithaca’s proposed IPO was approved by the FCA and published by Ithaca in October 2022. ClientEarth engaged in correspondence with the FCA following the publication of the registration document as it considered that it contained deficiencies regarding disclosure of Ithaca’s climate-related financial risks.

The FCA subsequently approved Ithaca’s prospectus, which was published in November 2022.  Certain amendments appear to have been made to the climate-related risk factor disclosed in the published prospectus (as compared with the registration document) but ClientEarth considered these were cosmetic in nature.

Ithaca’s prospectus contained a number of climate-related disclosures which included detail relating to risks such as:

•    Longer-term reduction in the demand for hydrocarbon products due to development of alternative energy technologies and consumer preference
•    Disruption to Ithaca’s operations as a result of climate change
•    Litigation and challenge by climate activists
•    Continued political attention to the role of human activity in climate change
•    The impact of international agreements and regulation.

The Financial Services and Markets Act 2000 (FSMA) provides that the FCA may not approve a prospectus unless it is satisfied that it contains the information required by the UK retained version of Regulation (EU) 2017/1129 (the UK Prospectus Regulation) and that a prospectus must contain the necessary information which is material to an investor for making an informed assessment of (amongst other things) the issuer’s assets and liabilities, profits and losses, financial position, and its prospects. It also provides that the information to be included may vary depending on the nature of the issuer, the type of securities and the circumstances of the issuer. FSMA also provides that the risk factors to be included in a prospectus shall be limited to risks that are specific to the issuer and/or to the securities and which are material for taking an informed investment decision.