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

FCA publishes Discussion Paper on Sustainability Disclosure Requirements

04 Nov, 2021

The Financial Conduct Authority (FCA) has published Discussion Paper DP21/4 'Sustainability Disclosure Requirements and investment labels' (the DP).

UK Government publishes a factsheet around the UK becoming the world’s first Net Zero-aligned Financial Centre

03 Nov, 2021

The UK Government has announced that the UK will be the world’s first Net Zero-aligned Financial Centre.

IFRS Foundation creates new sustainability standards board

03 Nov, 2021

The IFRS Foundation has announced the creation of its new International Sustainability Standards Board (ISSB) that will develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.

Climate-related disclosures prototype

03 Nov, 2021

The IFRS Foundation has released a climate-related disclosures prototype that is the proposal of the Technical Readiness Working Group (TRWG) for the first thematic standard of the ISSB.

Joint statement by the FCA, PRA, TPR and FRC on the publication of Climate Change Adaptation Reports 

01 Nov, 2021

The Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), The Pensions Regulator (TPR) and the Financial Reporting Council (FRC) have issued a joint statement on the publication of their Climate Change Adaptation Reports.

FRC Lab publishes a report on better practice TCFD reporting

01 Nov, 2021

The Financial Reporting Lab ("the Lab") has published a report to help companies prepare for mandatory Taskforce on Climate-related Financial Disclosures (TCFD) reporting.

ESMA announces enforcement priorities for 2021 financial statements

29 Oct, 2021

The European Securities and Markets Authority (ESMA) has announced the priority issues that the assessment of listed companies' 2021 financial statements will focus on. A special focus is on COVID-19 and climate-related disclosures.

EC event on sustainability reporting standards and the future of sustainability reporting

28 Oct, 2021

The European Commission (EC) organises a side event to COP 26 with the participation of the European Financial Advisory Reporting Group (EFRAG).

FRC publishes findings on the quality of corporate reporting in 2020/2021

27 Oct, 2021

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting 2020/2021. 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.

Annual report insights 2021 — Surveying FTSE reporting

26 Oct, 2021

Our latest annual reporting survey, Annual report insights 2021, provides insights into practices in annual reporting, focusing on areas where requirements have changed, where regulators are focusing or where innovative practices are emerging.

The Climate Financial Risk Forum publishes its second set of guides to help the financial industry to address climate-related financial risks

22 Oct, 2021

The Climate Financial Risk Forum (CFRF), jointly established in March 2019 by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), has published its second set of guides to help the financial industry effectively manage climate-related financial risks.

UK Government publishes roadmap setting out details on new sustainability disclosure requirements

20 Oct, 2021

The UK Government has published a roadmap setting out details of new economy-wide sustainability disclosure requirements, and the legislative and regulatory changes that will be made to deliver them. These will, for the first time, bring together UK sustainability reporting requirements under one integrated framework. The roadmap emphasises the need for high-quality, reliable, and internationally comparable sustainability information. This is necessary to improve decision-making, build trust and address risks of greenwashing.

New TCFD status report, additional and updated guidance

15 Oct, 2021

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 fourth status report providing an overview of the extent to which companies in their 2020 reports included information aligned with the core TCFD recommendations published in June 2017.

FRC to host webinar to discuss key findings of recent corporate reporting reviews

11 Oct, 2021

The Financial Reporting Council (FRC) is hosting a webinar to discuss the findings of its most recent corporate reporting reviews.

FRC issues its 2022 suite of Taxonomies

11 Oct, 2021

The Financial Reporting Council (FRC) has issued the 2022 suite of FRC Taxonomies.

IFRS Foundation publishes webcast on the Technical Readiness Working Group

07 Oct, 2021

The IFRS Foundation has published a webcast which provides an introduction of the Technical Readiness Working Group (TRWG) members, summary of its work programme, and an expected timeline of the TRWG.

PRA publishes its thematic feedback from the 2020/2021 round of written auditor reporting

06 Oct, 2021

The Prudential Regulation Authority (PRA) has published a letter to chief financial officers of selected deposit-takers which provides thematic feedback from the PRA’s review of written auditor reports received in 2021.

Regulations to improve climate-related reporting for occupational pension schemes now in force

01 Oct, 2021

The Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 and the Occupational Pension Schemes (Climate Change Governance and Reporting) (Miscellaneous Provisions and Amendments) Regulations 2021) (‘the Regulations’) are now in force.

Carbon Tracker publishes a report on a study of climate risks in financial reporting

20 Sep, 2021

Carbon Tracker has published a report on a study performed in collaboration with the Climate Accounting Project examining climate risks in financial reporting.

We comment on the FCA’s consultation paper CP21/18

11 Sep, 2021

We have published our comment letter on Financial Conduct Authority’s (FCA's) consultation paper CP21/18 'Enhancing climate-related disclosures by standard listed companies and seeking views on ESG topics in capital markets' (“the CP”).

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