Preparing for mandatory TCFD reporting including disclosures of scenario analysis

News types: Corporate Reports

Published: 28 October 2021

This year premium listed companies will need to report against the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations on a comply or explain basis in their annual reports with other companies following in the future.

The Financial Reporting Lab (the Lab) has published a report in advance of these requirements to help companies prepare for mandatory TCFD reporting.  It includes practical advice and examples that better address aspects of TCFD reporting from those companies already adopting the framework on a voluntary basis.  Alongside the report, the Lab has also published a snapshot of the status of current reporting against the TCFD framework in the UK which highlights the increased uptake in the last year.

One of the biggest challenges for companies adopting the TCFD framework is carrying out scenario analysis.  In addition to the Lab’s reports, the FRC has also published research by the Alliance Manchester Business School which investigates climate-related scenario analysis in more detail. The research highlights the various approaches companies have adopted, instances of good practice, typical challenges faced, and the common steps taken to conduct the analysis.

Phil Fitz-Gerald, Director of the Financial Reporting Lab

“It is good to see that many more companies have adopted the Taskforce on Climate-related Financial Disclosures (TCFD) framework over the last year but further development is needed to meet user expectations.   As mandatory reporting requirements come into place for premium listed companies at the end of the year, the Lab’s report and the research carried out by the Alliance Manchester Business School provide practical advice to companies on how to meet expectations of climate-related reporting under the TCFD framework”. 

Dr Yasmine Chahed, Visiting Research Fellow at Alliance Manchester Business School (AMBS), said:

“Efforts to limit global warming vary across the world’s nations. COP26 is just around the corner and represents an effort to limit global warming to 1.5-degrees, but businesses have to prepare for many possible outcomes and eventualities.

“That’s why projects like this are so important in helping to shape future regulatory strategy – and how that’s delivered. The climate challenge is huge and scenario analysis is critical in tackling this issue, and in facilitating the transition to a greener economy. 

“Our research hammers these points home and indicates that many businesses are uncertain of the effects of climate change on their organisation. It’s clear, then, that mapping out those uncertainties now will put businesses in a better position to overcome the obstacles that lie ahead.” 

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