The increased focus and scrutiny on climate change and ESG in the corporate world continues, with the FRC (Financial Reporting Council) now revealing its expectations and findings on reporting on climate change. 

The FRC has just published a major, cross-sector review into climate reporting. I've summarised some of the key findings, that I found of particular interest below.

  • Evidence of climate considerations influencing business models and company strategy is limited.
  • Some companies have set strategic goals such as 'net zero’, but it is unclear from their reporting how progress towards these goals will be achieved, monitored or assured.
  • An increasing number of companies provide narrative reporting on climate-related issues. While minimum legal reporting requirements are often met, users are calling for additional disclosure to inform their decision making.
  • Consideration and disclosure of climate change matters in the financial statements lags behind narrative reporting. The review identified areas of potential non-compliance with the requirements of International Financial Reporting Standards.
  • The quality of support, training and review provided to audit practices on climate change varies considerably across firms.
  • Audits reviewed indicated that auditors need to improve their consideration of climate-related risks when planning and executing their audits.
  • UK professional bodies and audit regulators in the Crown Dependencies are responding to climate change, but approaches differ in terms of substance and granularity.
  • Investors support the TCFD framework, but also expect to see disclosures regarding the financial implications of climate change. Investors are themselves facing a changing regulatory environment.

The end result is really that climate change is going to have to truly be integrated - and evidenced - in decision making of boards