Climate related publications

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 publications 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 publications

Accounting roundup — January 2023

24 Jan, 2023

This Accounting roundup, covering the period October 2022 through to December 2022, pulls together the headlines for all the latest developments in accounting, providing links to a wealth of further information and resources.

Accounting roundup — Closing Out 2022

10 Jan, 2023

Closing Out 2022 discusses the principal corporate reporting issues arising in respect of 31 December 2022 annual reports, covering areas of regulatory focus identified in the Financial Reporting Council’s (FRC's) Annual Review of Corporate Reporting 2021/2022 and issues arising from the current uncertain economic environment.

Governance in brief — FRC sets out key matters for 2022/23 reporting season

07 Dec, 2022

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting setting out key matters for 2022/23 reporting season.

On the board agenda 2023

07 Dec, 2022

As 2022 draws to a close, our annual review of board topics has two objectives – first, to act as a reminder of key matters for the reporting season, and second, to help you set the agenda for the year ahead.

Using sustainability reporting to drive behavioral change

10 Nov, 2022

This publication maps out a potential way forward on using sustainability reporting to drive behavioral change – not just for the adoption of sustainability reporting and organizational transformation, but also to create a broader operating environment conducive to widespread behavior change.

Corporate Reporting Insights 2022 — Surveying FTSE reporting

08 Nov, 2022

Our latest survey of FTSE annual reports, Corporate Reporting Insights 2022, provides insights into annual reporting trends, focusing on areas where requirements have changed, where regulators are focusing and where innovative practices are emerging.

Need to know — European sustainability reporting: Worldwide reach of the Corporate Sustainability Reporting Directive

14 Oct, 2022

This Need to know outlines the near final text for the Corporate Sustainability Reporting Directive (CSRD) that has been published following the provisional political agreement reached in June 2022.

Accounting roundup — October 2022

14 Oct, 2022

This Accounting roundup, covering the period July 2022 through to September 2022, pulls together the headlines for all the latest developments in accounting, providing links to a wealth of further information and resources.

Governance in brief — FCA and FRC publish findings on climate change disclosure — improvements required

06 Sep, 2022

At the end of July, the Financial Conduct Authority (FCA) and Financial Reporting Council (FRC) published the findings of their first joined up, and mutually complementary, reviews of mandatory climate reporting under the new Listing Rule requirements. The FCA sets out its expectations for compliant reporting, underpinned by the need to establish and embed adequate climate reporting procedures, systems and controls at companies. It outlines the findings from its review and highlights that it is considering whether to take regulatory action against certain listed entities for inadequate reporting. The FCA also reiterates support for the forthcoming International Sustainability Standards Board (ISSB) standards and the intention to move away from ‘comply or explain’ to mandatory disclosure alongside the adoption of those standards in the UK. The FRC’s complementary report evaluated both the quality of Task Force on Climate-related Financial Disclosures (TCFD) and the extent of climate-related disclosures within the financial statements. It provides examples of better practice disclosures which both the FRC and the FCA encourage companies to refer to when preparing or seeking to improve their own disclosures.

Deloitte comment letter on the draft European Sustainability Reporting Standards (ESRS)

10 Aug, 2022

Deloitte supports consistent reporting of high-quality, relevant, reliable and comparable information that will enable investors and other relevant stakeholders to make decisions that support the transition to a green and inclusive economy. The draft European Sustainability Reporting Standards (ESRS) are comprehensive and generally have the potential to result in relevant information, but we have key concerns that they will create issues for the quality of the information provided, the effective implementation and enforceability of the standards, and consequently will not support the ultimate objective.

Accounting roundup — July 2022

27 Jul, 2022

This Accounting roundup, covering the period April 2022 through to June 2022, pulls together the headlines for all the latest developments in accounting, providing links to a wealth of further information and resources.

Deloitte comment letter on the Transition Plan Taskforce’s call for evidence on proposals for a sector-neutral framework for private sector transition plans

21 Jul, 2022

We have responded to the Transition Plan Taskforce’s (TPT's) call for evidence on proposals for a sector-neutral framework for private sector transition plans.

Need to know — New FCA Policy Statement and Listing Rule promoting better climate-related financial disclosures aligned with TCFD

14 Jul, 2022

The Financial Conduct Authority (FCA) have published a Policy Statement and Listing Rules requiring listed entities to provide Task Force on Climate-related Financial Disclosure (TCFD) aligned disclosures.

On the board agenda – half year 2022

05 Jul, 2022

At a time when macro topics once again dominate, this half year edition of “On the Board Agenda” has two objectives – first, to act as a reminder of key matters for the half year report, and, second, to help you set the agenda for the remainder of the year, contextualised of course as usual.

Need to know — European sustainability reporting — EFRAG launches consultation on first set of European Sustainability Reporting Standards

24 May, 2022

This Need to know discusses the draft European Sustainability Reporting Standards (ESRS) that have been published by the European Financial Reporting Advisory Group (EFRAG) in April 2022.The publication outlines the background, proposed architecture of ESRS, proposed cross-cutting standards and proposed topical standards.

The new FCA compliance statement on TCFD disclosures-Observations from first reporters

08 Apr, 2022

This publication presents the results of our survey into how the first wave of December 2021 year-end reporters have approached the new TCFD reporting requirements.

Need to know — Sustainability reporting — ISSB proposes global baseline of sustainability disclosure standards for capital markets

06 Apr, 2022

This Need to know outlines the proposals for IFRS Sustainability Disclosure Standards IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures published for public consultation on 31 March 2022 by the International Sustainability Standards Board.

A Closer Look — Investor demand for corporate reporting in line with the Paris Agreement on climate change

25 Mar, 2022

This publication is an update to 'A Closer Look' first published in December 2020 and addresses output of the November 2021 COP26 conference in Glasgow and further expressions from stakeholders of their expectations in respect of climate-related information in financial statements, examining perceived information gaps and how they might be addressed under current IFRS Accounting Standards.

Need to know — UK government finalises legislation on climate-related financial disclosures

03 Feb, 2022

This Need to know discusses regulations approved by the UK government in January 2022, which introduce new climate-related financial disclosures for certain UK companies and Limited Liability Partnerships (LLPs).

Accounting roundup — Closing Out 2021

16 Dec, 2021

Closing Out 2021 discusses the principal corporate reporting issues arising in respect of 31 December 2021 annual reports, covering areas of regulatory focus identified in the FRC’s Annual Review of Corporate Reporting 2020/2021, issues arising from climate change including new and forthcoming climate-related disclosures and developments in reporting standards.

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