Corporate reporting – report and further guidance on climate-related financial disclosures

The Financial Stability Board’s Task Force has published its 2021 status report on climate-related financial disclosures, as well as additional guidance on metrics, targets and climate transition plans.

The Task Force published its Recommendations on Climate-related Financial Disclosures (the TCFD Recommendations) in June 2017 to help companies produce disclosures that show how they measure and respond to climate change risks. Under Listing Rule 9.8.6(8) premium listed companies are required to report climate-related information in line with the TCFD Recommendations on a comply or explain basis for financial years starting on or after 1 January 2021 (see our briefing here). This requirement is likely to be extended to standard listed companies for financial years beginning on or after 1 January 2022 (see our blog post here) and all large UK-incorporated companies for financial years beginning on or after 6 April 2022 (see our blog post here).

Status report

The status report summarises the extent to which companies included information aligned with the TCFD Recommendations in their reports for 2018, 2019 and 2020.

Key findings from the report include that:

• disclosure against the TCFD Recommendations has increased, but only 50% of companies were disclosing in alignment with three or more of the recommended disclosures;
• whilst many companies are now disclosing information on climate-related risks and opportunities, few are providing detailed information on the processes for identifying and managing those risks; and
• disclosures in relation to the resilience of company strategy to different climate-related scenarios remain low overall.

Guidance on metrics, targets and transition plans

The latest TCFD-related guidance focuses on disclosures of climate-related metrics and targets and key information from transition plans. Areas covered include:

• Metrics – The guidance sets out seven broad categories of climate-related metrics which all companies across all sectors should disclose, including greenhouse gas emissions, transition risks and capital deployment. There is additional guidance on metrics and portfolio alignment for companies in the financial sector.
• Transition plans – The guidance sets out key items for companies to consider when formulating and disclosing transition plans, oriented around the four TCFD Recommendations. The Task Force notes that progress should be reported on an annual basis and transition plans should be reviewed at least every five years.

The Task Force has also updated its guidance on Implementing the TCFD Recommendations to provide additional guidance on disclosing metrics, targets, and transition plan information in line with the TCFD recommendations.