Climate-related news

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 thematic 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 page includes all of our news on the financial reporting impacts of climate change.  In addition Deloitte's climate change website includes a suite of learning videos, interviews with people driving climate action, and a library of links to further resources and guidance.

Related news

IFRS Foundation Trustees hold discussion on sustainability standards

22 Dec, 2022

The IFRS Foundation Trustees have issued insights from a panel discussion held during its quarterly meeting in Seoul, South Korea. The discussion focused on IFRS Sustainability Disclosure Standards and why they are needed.

Sustainability Standards Advisory Forum membership announced

21 Dec, 2022

The Sustainability Standards Advisory Forum (SSAF) composition has been announced and will include representatives from thirteen jurisdictions and regions. The SSAF goal is to provide the ISSB with technical advice in the development of ISSB’s standard-setting.

FRC announces thematic review and priority sectors for 2023/24

20 Dec, 2022

The Financial Reporting Council (FRC) has announced its areas of supervisory focus for 2023/24, including high priority sectors, for corporate reporting reviews and audit quality inspections.

UK government delays process for legislating for the UK Green Taxonomy

16 Dec, 2022

The UK Government has confirmed that it will delay the process for legislating for the UK Green Taxonomy

CSRD published in the Official Journal of the European Union

16 Dec, 2022

After the European Parliament adopted the Corporate Sustainability Reporting Directive (CSRD) on 10 November 2022 and the Council of the European Union gave the final green light on 28 November 2022, the CSRD has now been published in the Official Journal of the European Union.

IPSASB takes next step in public sector sustainability reporting

09 Dec, 2022

Building on strong global stakeholder support for the proposals in its consultation paper 'Advancing Public Sector Sustainability Reporting', the International Public Sector Accounting Standards Board (IPSASB) has decided to commence the scoping of three potential public sector specific sustainability reporting projects pending securing the resources needed to begin guidance development.

Council of the European Union adopts CSRD

28 Nov, 2022

After the European Parliament adopted the Corporate Sustainability Reporting Directive (CSRD) on 10 November 2022, the Council of the European Union has now given the final green light.

Consultation on draft 2023-2025 GSSB work programme

24 Nov, 2022

The Global Sustainability Standards Board (GSSB) has published its draft 2023-2025 work programme and accompanying project schedule for 2023 for public comment.

EFRAG submits draft ESRS to EC

23 Nov, 2022

The European Financial Reporting Advisory Group (EFRAG) has submitted its draft European Sustainability Reporting Standards (ESRS) to the European Commission (EC).

G20 Leaders support upcoming ISSB Standards

17 Nov, 2022

The G20 has issued final declaration following the G20 Leaders meeting held in Bali on 15–16 November 2022.

Transition Plan Taskforce publishes its consultation on private sector transition plans

15 Nov, 2022

At COP27 the UK’s Transition Plan Taskforce (TPT) published its consultation on what private sector companies need to do to implement and disclose a transition plan.

IFAC publishes a report on climate-related disclosure

15 Nov, 2022

The International Federation of Accountants (IFAC) has published a report providing insight into climate-related disclosure.

European Parliament adopts CSRD

10 Nov, 2022

The European Parliament has today adopted the Corporate Sustainability Reporting Directive (CSRD) proposed by the European Commission (EC) in April 2021.

IOSCO outlines need for timely sustainability disclosure and assurance standards

10 Nov, 2022

At COP27, the International Organization for Securities Commissions (IOSCO) has outlined the actions it undertakes to protect investors by mitigating greenwashing in financial markets, to contribute to sustainability disclosure standards benefitting issuers and investors, and to promote well-functioning carbon markets.

ISSB announces new Partnership Framework, CDP to incorporate ISSB climate standard into its disclosure platform

08 Nov, 2022

At the finance day of 27th United Nations Conference of the Parties (COP27), ISSB Chair Emmanuel Faber will introduce the ISSB’s new Partnership Framework with more than 20 partner organisations. In addition, CDP and the ISSB have announced that CDP will incorporate the IFRS S2 'Climate-related Disclosures' requirements into its global environmental disclosure platform.

ESMA announces enforcement priorities for 2022 financial statements

28 Oct, 2022

The European Securities and Markets Authority (ESMA) has announced the priority issues that the assessment of listed companies' 2022 financial statements will focus on. A special focus is on Russia’s invasion of Ukraine and climate-related disclosures.

FRC publishes findings on the quality of corporate reporting in 2021/2022

28 Oct, 2022

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting 2021/2022. The report sets out the FRC’s expectations of areas of corporate reporting that require improvement and highlights the ten most frequently raised topics where improvements to reporting quality are needed.

FCA launches consultation on Sustainability Disclosure Requirements and investment labels

26 Oct, 2022

The Financial Conduct Authority (FCA) has published Consultation Paper CP/22/20 'Sustainability Disclosure Requirements and investment labels'.

FSB calls for continued progress on disclosures on climate-related risks

17 Oct, 2022

The Financial Stability Board (FSB) has submitted to the G20 Finance Ministers and Central Bank Governors two reports as part of its work on addressing climate-related financial risks.

New TCFD status report

17 Oct, 2022

The Task Force on Climate-related Financial Disclosures (TCFD) set up by the Financial Stability Board (FSB) to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to lenders, insurers, investors and other stakeholders has published a fifth status report providing an overview of the extent to which companies in their 2021 reports included information aligned with the core TCFD recommendations published in June 2017.

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