Investors seek clearer reporting on climate-related issues
22 October 2019
Companies are falling short of investors’ expectations for clearer reporting on climate-related issues according to a new report Climate-related corporate reporting
from the FRC Financial Reporting Lab (the Lab).
As economies increasingly transition towards low carbon and climate resilient futures, the Lab’s report highlights the gap between current reporting and investor expectations and calls on companies to bridge this gap.
It provides practical guidance about where companies can improve their reporting. The report also outlines what investors want to understand, questions companies should ask themselves, recommended disclosures, and a range of examples of the developing practice of climate-related reporting.
While reporting on climate change is an evolving practice, expectations are changing rapidly. The Lab recommends companies use the Task Force on Climate-related Financial Disclosures (TCFD) framework to report on climate-related issues, as this was well supported by participants, and the UK Government expects all listed companies and large asset owners to disclose in line with the TCFD recommendations by 2022.
Earlier this year, the FRC published a statement outlining the responsibility of Boards of UK companies to consider their impact on the environment and the likely consequences of long-term business decisions. Boards should, therefore, address and where relevant, report on the effects of climate change.
Sir Jon Thompson, CEO of the Financial Reporting Council, said:
“Investors are rightly demanding more information and greater transparency from companies on the challenges posed by climate change.
“As societal and investor expectations evolve, alongside the regulatory environment, it is clear companies need to rapidly increase their transparency and improve their reporting to meet this demand.
“The FRC itself recognises the need to play a more active role in this space and this report is an important step in recognising climate change as a priority and building on the FRC’s activities.”
A link to the Lab’s report can be found here