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

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We have commented on the Taskforce on Nature-related Financial Disclosures (TNFD) – Feedback on v0.4 of the TNFD Beta Framework.

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Need to know — UK government publishes Green Finance Strategy – Mobilising green investment

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This Need to know discusses the UK government’s Green Finance Strategy - Mobilising green investment, published in March 2023.

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The UK government has published a new policy paper, Green Finance Strategy - Mobilising Green Investment (“the 2023 Strategy”), building on the previous Green Finance Strategy which was published in July 2019. The 2023 Strategy sets out the government’s updated plans for the UK to become the world’s first net zero-aligned financial centre, including five key objectives addressing UK financial services growth and competitiveness, investment in the green economy, financial stability, incorporation of nature and adaptation and alignment of financial flows with climate and nature objectives.

TPR review into pension scheme climate reports finds areas for improvement and some good practice

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The Pensions Regulator (TPR) has conducted a review of the first set of climate-related disclosures produced by occupational pension schemes under new regulations which came into effect on 1 October 2021 aimed at imprving governance and reportng of climate-related risks and opportunities.

IASB launches new project to explore climate-related risk reporting in financial statements

23 Mar, 2023

The IASB has launched a new project aimed at exploring ways for entities to provide better information about climate-related risks in their financial statements. The project was initiated in response to feedback from the IASB’s recent Agenda Consultation.

Deloitte response to the survey on the need for GHG protocol corporate standards and guidance updates

22 Mar, 2023

In our response, we emphasise aspects of the GHGP for which we believe there is a need for greater consistency. In particular, we recommend that that the Corporate Standard should use terminology from widely-adopted financial reporting standards – notably IFRS Accounting Standards and U.S. GAAP, to the extent possible. We believe this is particularly important to promote connectivity of GHG emissions disclosures with financial reporting.

EC tells EFRAG to concentrate on the implementation of Set 1 of the ESRS

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On 22 November 2022, the European Financial Reporting Advisory Group (EFRAG) submitted its first set of draft European Sustainability Reporting Standards (ESRS) to the European Commission (EC) and began working on Set 2 of the ESRS, which would contain sector-specific standards. EFRAG has now been told to concentrate on providing additional guidance on how to apply the proposed standards in Set 1.

Bases for conclusions on draft ESRS available

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On 22 November 2022, the European Financial Reporting Advisory Group (EFRAG) submitted its draft European Sustainability Reporting Standards (ESRS) to the European Commission. The bases for conclusions to go with each proposed ESRS have now become available as well.

Stay Tuned Online - March 2023

10 Mar, 2023

Stay Tuned Online is an online corporate reporting update, aimed at helping finance teams keep up to speed with narrative, governance and financial reporting issues. Each update lasts about an hour.

We comment on the Transition Plan Taskforce consultation on private sector transition plans

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We have responded to the Transition Plan Taskforce’s (TPT's) consultation on the proposed Disclosure Framework and Implementation Guidance.

Deloitte comment letter on the Transition Plan Taskforce consultation on private sector transition plans

08 Mar, 2023

We have responded to the Transition Plan Taskforce’s (TPT's) consultation on the proposed Disclosure Framework and Implementation Guidance.

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