The FRC has published a thematic review on climate reporting.
The report follows a review by the FRC into climate-related issues as they affect governance, reporting and audit, and the roles of a range of market participants. It sets out the FRC’s views on current market practice and expectations for the future.
The key findings in the report include:
- Governance – The report considers how boards take into account climate-related challenges. It notes that, although more companies are disclosing their approach to climate governance, it is often unclear how consideration of climate-related issues informs key decisions or impacts business model and strategy. Investors are looking for boards to explain how they consider and assess climate-related matters.
- Corporate reporting – Whilst many companies comply with the minimum reporting requirement in relation to climate issues, the report states that frequently this does not meet the needs of investors and other users of the annual report. In particular, the report notes that investors seek to understand the risks and opportunities presented by climate change, including their prioritisation, likelihood and impact, the timeframes over which they might crystallise and the resilience of the company’s business model and strategy. The report also notes that a growing number of companies report, or intend to report, against the Task Force on Climate-related Financial Disclosures (TCFD) framework. The FRC encourages the use of the TCFD framework but notes that these disclosures would benefit from greater detail in relation milestones, targets and metrics.
- Auditors – The report discusses how auditors take into account climate-related issues. It concludes that auditors need to improve their consideration of climate-related risks when planning and executing their audits.
The report is accompanied by five further reports containing more detailed findings on each of the five themes contained in the report: how boards are taking into account climate-related challenges; how companies are developing their reporting on climate-related challenges; what investors want to see; how auditors are taking into account climate-related challenges; and how professional bodies and regulators are taking account of climate change.