Climate-related resources

Climate change continues to be an area of specific focus for investors, regulators and other business stakeholders who are increasingly demanding better disclosures on climate change matters.  Investors and other stakeholders are clear that climate-related risks could be material to businesses in all sectors and are asking for clear, specific and quantified information that describes:

  • whether the company’s climate-related commitments and targets are ‘Paris-aligned’, how the company will deliver on those and how the commitments and targets have been reflected in the financial statements;
  • how the impacts of physical and transition risks have been considered in preparing the financial statements;
  • what climate-related assumptions and estimates were used to prepare the financial statements, how they are Paris-aligned, or an explanation of why not, together with sensitivity analysis showing the impact of using Paris-aligned assumptions and estimates;
  • how Paris-alignment impacts dividend-paying capacity; and
  • whether narrative reporting on climate risks and the accounting assumptions are consistent, or an explanation for any divergence.

Regulatory expectations and reporting requirements

The Financial Reporting Council (FRC) indicates that whilst companies have ‘generally risen to the challenge of mandatory Task Force on Climate-related Financial Disclosures (TCFD) reporting’, this is an area where companies still need to focus on to improve the quality of their reporting. Whilst premium-listed commercial companies will already be familiar with mandatory ‘comply or explain’ TCFD reporting, for accounting periods beginning on or after 1 January 2022, those disclosure requirements are extended to standard listed companies, asset managers, life insurers and FCA-regulated pension providers. Companies should also be aware of updates to the TCFD guidance that will apply for the first time.  Those that claimed full compliance with all of the TCFD recommendations and recommended disclosures last year will likely need to provide additional disclosures this year to continue to claim that their disclosures are consistent.

Both the FRC and Financial Conduct Authority (FCA) set out their increasing expectations for the coming reporting season in their recent thematic reviews.  They expect companies to:

  • give more granular and company specific information about the effects of climate change on different businesses, sectors and geographies;​
  • ensure that the discussion of climate-related risks and opportunities is balanced;​
  • link climate-related disclosures, such as the output of climate-related scenario analysis, with other relevant narrative disclosures in the annual report, such as the business model or strategy;​
  • explain how materiality has been applied in deciding which climate-related information should be disclosed; and​
  • ensure connectivity between TCFD disclosures and the financial statements to help investors understand the relationship between climate-related matters and judgements and estimates applied in the financial statements.

Whilst climate reporting is improving, the expectations of regulators and investors are increasing. Both regulators will be looking for continued improvement in 2022. In particular, it is clear that disclosures should be provided at the TCFD all-sector guidance level and, where appropriate, the supplemental guidance for the financial sector and for non-financial groups should also be addressed.  Companies making net zero commitments are encouraged to refer to the messages contained within a recent FRC Lab report to assist them in meeting investor and regulatory expectations. 

In addition to the messages from the FRC and FCA, the European Securities and Markets Authority (ESMA) has also announced that it will focus on climate-related matters as part of its Common Enforcement Priorities for 2022 financial statements.

For accounting periods beginning on or after 6 April 2022, the Climate-related Financial Disclosure Regulations (CFD) will require certain in-scope entities to make climate-related financial disclosures aligned to the four TCFD pillars in the strategic report.  The government has issued non-binding guidance to help with application of these requirements.

Progress towards global sustainability reporting standards

The International Sustainability Standards Board (ISSB) is now emerging as the global standard-setter for standards on sustainability reporting for capital markets.  The UK government has stated that it intends to require UK businesses to report against the standards developed by the ISSB and that it will create a mechanism to adopt and endorse standards issued by the ISSB for use in the UK. These will form part of the UK government’s Sustainability Disclosure Requirements (SDR), a single framework of economy-wide disclosures for companies, asset managers and owners, and investment products.

In March 2022, the ISSB, published two Exposure Drafts (EDs) for its first IFRS Sustainability Disclosure Standards; IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.  The ISSB is currently redeliberating the proposals in the EDs and publication of the final standards is expected early in 2023.

Other climate-related developments

In November 2022, the European Union’s Corporate Sustainability Reporting Directive (CSRD) was adopted by the European Parliament and approved by the Council of the European Union. The CSRD, an enhanced version of the existing Non-financial Reporting Directive, will make sustainability reporting using European Sustainability Reporting Standards (ESRS) mandatory for all EU-listed and large companies, phased in from 2024 onwards.  The CSRD will directly affect UK companies if they have securities listed on EU regulated markets or if they have at least one EU subsidiary or EU branch and meet certain turnover thresholds. It will also apply directly to EU subsidiaries of UK companies.  The first set of draft ESRS was submitted to the European Commission in November 2022 and exposure drafts for a second set of standards including sector-specific standards are also expected in 2023. 

This UK Accounting plus page in­cludes our climate-related re­sources to assist com­pan­ies.  It includes links to:

Related resources

FRC announces areas of supervisory focus for 2024/25

08 Dec, 2023

The Financial Reporting Council (FRC) has announced its areas of supervisory focus for 2024/25, including priority sectors, for corporate reporting reviews and audit quality inspections.

Research into the role of the CFO and finance function in the climate transition

06 Dec, 2023

New research has been published which considers the role of finance in the transition to a lower-emission world.

Declaration of support to advance the adoption or use of the ISSB’s climate-related reporting

04 Dec, 2023

Almost 400 organisations from 64 jurisdictions have signed a declaration of support to advance the adoption or use of the climate-related reporting of the International Sustainability Standards Board (ISSB) at a global level. The declaration from companies, investors, stock exchanges, the accountancy profession, multilaterals, non-governmental organisations, universities, data analytics providers, corporate advisors and others was announced at COP28, currently taking place in Dubai, United Arab Emirates.

IFRS Foundation and ISO commit to future cooperation towards effective communication about sustainability-related risks and opportunities

04 Dec, 2023

The IFRS Foundation and the International Organization for Standardization (ISO) have confirmed their shared commitment to cooperate to support efficient and resilient global economies at COP28, currently held in Dubai, United Arab Emirates. Both organisations recognise that working together in areas of common interest is in the public interest.

Erkki Liikanen speaks on progress and priorities to advance global sustainability disclosures

04 Dec, 2023

The Chair of the IFRS Foundation Trustees, Erkki Liikanen, held a speech at COP28, currently held in Dubai, United Arab Emirates, to reflect on the progress that has been made since the IFRS Foundation announced the decision to establish the International Sustainability Standards Board (ISSB) at COP26.

IFRS Foundation launches knowledge hub to support the implementation of IFRS S1 and IFRS S2

01 Dec, 2023

The IFRS Foundation has launched the IFRS Sustainability Knowledge Hub to support the implementation of IFRS S1 ‘General Requirements for Disclosure of Sustainability-related Financial Information’ and IFRS S2 ‘Climate-related Disclosures’. The hub is a tool in the capacity building programme for the new standards before they become effective for annual periods beginning on or after 1 January 2024.

FCA confirms Sustainability Disclosure Requirements (SDR) and investment labelling regime

01 Dec, 2023

The Financial Conduct Authority (FCA) has published Policy Statement (PS) 23/16 ‘Sustainability Disclosure Requirements (SDR) and investment labels’ which contains the FCA’s final rules and guidance to improve trust and transparency to the market for sustainable investment products.

Multilateral development banks confirm support for work of the ISSB at COP28

30 Nov, 2023

At COP 28, currently held in Dubai, United Arab Emirates, the Asian Infrastructure Investment Bank, the European Investment Bank, the Inter-American Development Bank and the European Bank for Reconstruction and Development have confirmed their support for the work of the International Sustainability Standards Board (ISSB).

ACCA publishes a new guide on sustainability reporting preparation

28 Nov, 2023

The Association of Chartered Certified Accountants (ACCA) has published a new guide 'Sustainability reporting - the guide to preparation' to help companies start to prepare for sustainability reporting.

A4S publishes third edition of introduction to sustainability-related reporting

28 Nov, 2023

Accounting for Sustainability (A4S) has published the third edition of 'Navigating the Reporting Landscape'.

Need to know — Areas of Focus for Corporate Reporting (November 2023)

13 Nov, 2023

This 'Need to know' sets out financial reporting issues that may be relevant in view of the current economic and geopolitical environment and also highlights areas of regulatory focus and recent changes in accounting standards. The topics contained within this publication will be relevant to all companies preparing annual reports and accounts as well as half-yearly reporters. This 'Need to know' should be read in conjunction with Closing Out 2022 and the Financial Reporting council’s (FRC’s) latest Annual Review of Corporate Reporting which contain additional topics for UK entities to consider including reporting expectations and areas of regulatory focus.

FRC issues policy update on the UK Corporate Governance Code

09 Nov, 2023

In light of the Government's withdrawal of proposed secondary legislation laid in July covering the Audit & Assurance Policy, the Resilience Statement, the Material Fraud Statement and enhanced reporting on distributions, the Financial Reporting Council (FRC) has issued a policy announcement confirming that the update to the UK Corporate Governance Code ("the Code") will go ahead but will recognise the wider debate about business reporting requirements and burdens across the economy.

GRI establishes 'Sustainability Innovation Lab'

09 Nov, 2023

The Global Reporting Initiative (GRI) has announced the upcoming launch of the Sustainability Innovation Lab (SIL), in partnership with the IFRS Foundation. Through the SIL, representatives of GRI, the ISSB and other key stakeholders will collaborate to identify emerging sustainability disclosure topics, developing concepts, best practices and data-driven solutions.

First meeting of the transition implementation group on IFRS S1 and IFRS S2

08 Nov, 2023

The inaugural meeting of the 'Transition Implementation Group on IFRS S1 and IFRS S2' (TIG) will take place on 21 November 2023. The TIG was set up to inform the ISSB about potential implementation questions that could arise when companies implement the new standards IFRS S1 'General Requirements for Disclosure of Sustainability-related Financial Information' and IFRS S2 'Climate-related Disclosures'.

Need to know — TNFD publishes final recommendations for nature-related risk management and disclosure

31 Oct, 2023

This Need to know outlines the final recommendations for nature-related risk management and disclosure (Version 1.0), published by the Taskforce on Nature-related Financial Disclosures (TNFD) in September 2023. These recommendations aim to help businesses start measuring, managing and disclosing their nature-related impacts, dependencies, risks and opportunities

Need to know — California Climate Legislation

30 Oct, 2023

In October 2023, the California Governor signed into law two state senate bills that collectively require certain public and private US companies doing business in California to provide both quantitative and qualitative climate disclosures. This newsletter explains the content of the two bills.

ESMA publishes results of a fact-finding exercise on corporate reporting practices under the Taxonomy Regulation

29 Oct, 2023

The European Securities and Markets Authority (ESMA) has published a summary of findings of a fact-finding exercise on corporate reporting practices under the Taxonomy Regulation.

Need to know — Transition Plan Taskforce publishes final disclosure framework on climate transition plans

25 Oct, 2023

This Need to know discusses the Transition Plan Taskforce’s (TPT) Disclosure Framework and implementation guidance. It also summarises the expected forthcoming consultations and next steps to introduce UK disclosure requirements related to transition plans.

European Commission consults on delaying certain ESRSs

25 Oct, 2023

On 24 October 2023, the European Commission launched a two-month consultation on the postponement of the sector-specific European Sustainability Reporting Standards (ESRS) as well as the ESRS for third country companies.

ESMA report on disclosures of climate-related matters in the financial statements

25 Oct, 2023

The European Securities and Markets Authority (ESMA) has a published report with examples of climate-related matters in IFRS financial statements.

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