Climate disclosures need more progress: UK regulators

Premium-listed companies have made good progress with climate-related financial disclosures, but further improvements are needed, two UK regulators said today.

In complementary reports, the Financial Conduct Authority (FCA) and the Financial Reporting Council (FRC) assessed the first climate-related financial disclosures made. Premium-listed commercial companies have been required since 2021 to set out in annual reports whether they have made disclosures consistent with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). The FCA has since extended the obligation to standard-listed companies. The TCFD, which was set up by the Financial Stability Board in 2015 and has members from a range of financial institutions, has developed a set of voluntary climate disclosures for organisations to use.

Companies have made "significant steps forward in the quality of climate-related information provided," the FCA found in a review of 170 companies. But some companies did not appear to meet standards, it said.

The quality of disclosures must improve, the regulators found. More granular information about the effects of climate change on businesses was needed and companies should clarify how climate-related data relate to other business risks. And organisations should clearly lay out how the effects of different global warming scenarios and their net zero commitments might affect valuation of their assets, the FRC said.

A common global reporting standard is needed "to deliver the consistency and comparability of corporate reporting that the market needs," the FCA said. It has worked to encourage progress towards this, in the shape of the International Sustainability Standards Board (ISSB) — part of the IFRS Foundation. The ISSB opened a consultation on its proposals in March and hopes to release a final standard by the end of the year. Its draft standard builds on TCFD recommendations, among others.

The FCA said today it expects the UK government to consult on adopting ISSB standards "in due course."

By Georgia Gratton