As part of the recent launch of the Financial Reporting Council Lab’s Climate Thematic reports, Phil Fitzgerald set out the key findings of the work the FRC has been undertaking on climate change reporting.

Last year, alongside the UK Government’s Green Finance Strategy announcement, the FRC set out its expectations of companies, boards, auditors and the wider accountancy profession, making it clear that they needed to play their part in ‘one of the defining issues of our time’. This year, the FRC embarked on a wide-ranging review that led to the Climate Change Thematic reports.

The FRC asked five key questions as part of this part of its review and produced stand-alone reports looking at each one:

In addition to the five individual reports, Phil advised reading the FRC’s summary report for more detail on its key findings and how it will continue to focus on this important area of reporting.

Phil shared evidence that companies are embracing the challenges, but highlighted that there is still more to be done:

  • Boards are having better discussions on how climate change affects the sustainability of their businesses
  • Companies are starting to include more narrative reporting on how they’re considering climate-related challenges and how that affects the strategy going forward
  • Auditors are starting to build climate-related issues into their methodology and into the training and resources that they’re providing to their teams,
  • Professional bodies are starting to build guidance to help accountants consider climate change as part of their considerations
  • Investors are keeping up the pressure on companies to consider and report on ESG considerations

The FRC would like to see companies, boards, investors and professional bodies take the challenge further:

  • Within reporting, it would like to see evidence not just of board discussion on climate-related issues, but how it is influencing the business model and company strategy; it would also like to see narrative reporting disclosures on climate impact reflected more strongly in the financial statements
  • It is encouraged by the amount of training, support, and resources being developed by audit firms, but is looking for them to do more to ensure that their internal quality monitoring processes are paying enough attention to climate change
  • It is also encouraged by professional bodies starting to address climate issues but notes that there are still wide-ranging approaches in terms of substance and granularity
  • Investors continue to support the Task Force for Climate-Related Financial Disclosures (TCFD) framework but also expect to see disclosures regarding the financial implications of climate change in the financial statements themselves

Phil also shared details of the FRC’S statement on non-financial reporting frameworks and the Government’s mandatory TCDF reporting roadmap.

The FRC’s statement recognises the difficulties companies face when deciding which non-financial reporting framework is most relevant for them, their investors, and other stakeholders. It supports the progression of international standards on non-financial reporting and it welcomes the IFRS Foundation’s consultation on setting up an international Sustainability Standards Board but anticipates that this will not be available in the short to medium-term.

In the meantime, the FRC supports and is encouraging companies to apply the TCFD framework alongside the Sustainability Accounting Standards Board (SASB) framework to provide the market with more consistent, comparable metrics in the interim.

Find out more

  • Click here to view a recording of the full launch event, including presentations and a Q&A from the FRC, BlackRock, ITV and Conran Design Group.
  • Phil has also kindly provided his responses to additional questions posed by attendees during and following the webinar you can read them here.

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