FRC thematic review examines quality of climate-related metrics and targets disclosures
News types: Corporate Reports, Guidance, Policies and Responsibilities, Publications
Published: 26 July 2023
The Financial Reporting Council (FRC) has today published a thematic review, assessing the quality and maturity of climate-related metrics and targets disclosures.
The review analysed TCFD disclosures from 20 companies' 2022 annual reports across four sectors: materials and buildings, energy, banks, and asset managers. It identified areas of better reporting practice as well as opportunities for improvement.
Key findings show an incremental improvement in the quality of companies' disclosure of net zero commitments and interim emissions targets. However, disclosures of concrete actions and milestones to meet targets were sometimes unclear, and comparability of metrics between companies remains challenging. Given the large volume of information presented, many companies are finding it challenging to explain their plans for transitioning to a low-carbon economy clearly and concisely.
The review also found that explanations of how climate targets affect financial statements still need improvement. Boilerplate language on climate being 'considered' provides little insight on impacts.
FRC Executive Director of Regulatory Standards Mark Babington said:
“This review highlights the continued need for clearer, more decision-useful disclosures of companies’ plans to transition to a low-carbon economy. We encourage companies to focus on explaining targets, actions, and any impacts on the financial statements.
“With greater maturity in reporting, we expect clearer and more concise disclosures reflecting how companies measure and manage their individual climate risks and opportunities.”