The Financial Conduct Authority (FCA) and Financial Reporting Council (FRC) have published two reports on the quality of climate-related reporting by listed companies.
For financial years beginning on or after 1 January 2021, premium listed commercial companies are required to include a statement in their annual financial report setting out whether they have made disclosures consistent with the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations (see our briefing here for further details).
The FCA reviewed 170 companies at a high level and 30 companies in more detail, and found an increase in the quantity and quality of companies' climate-related disclosures in comparison with previous years. However, it also found instances where companies said that they had made disclosures consistent with the TCFD Recommended Disclosures when it appeared they had not – the FCA is considering these cases in more detail and may take action as appropriate.
The FRC reviewed 25 larger companies more impacted by climate change and found that companies were able to provide many of the TCFD disclosures expected by the FCA's Listing Rules, also noting an improvement compared with previous years. However, the FRC identified several areas where companies will need to raise the quality of their disclosures in the future, including explaining more clearly how the effects of their own net zero commitments may affect the valuation of their assets and liabilities.
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