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Author: ICAEW Insights
Published: 20 Feb 2023
The latest addition to the ICAEW Financial Reporting Faculty’s popular range of factsheets is helping preparers get to grips with the requirements of the UK’s Climate-related Financial Disclosure Regulations.
While the suite of existing factsheets covers UK regulations for company accounts (as well as financial reporting under IFRS and UK GAAP), this publication is the first to be focused on sustainability reporting, reflecting the growth in reporting requirements in this area.
The Climate-related Financial Disclosure Regulations, introduced in 2022, require disclosure of climate risks and opportunities facing businesses. This follows the recognition that the reporting of material climate-related information helps support investment decisions as we transition towards a low-carbon economy. Enhanced disclosure requirements better equip investors to direct investments towards sustainable and resilient businesses.
This year will see in-scope publicly quoted companies, large private companies and LLPs report in line with the regulations for the first time. Entities are required to include climate-related information across four key areas: governance, strategy, risk management, and metrics and targets.
The disclosures are based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. They must be included in the Non-Financial and Sustainability Information Statement within the strategic report (or Energy and Carbon Report for LLPs not required to produce a strategic report).
The new reporting regime is part of a fast-evolving landscape of climate reporting requirements. The faculty’s new factsheet helps preparers navigate this complex landscape by providing answers to frequently asked questions, including how the regulations interact with other reporting requirements, such as the TCFD recommendations, the FCA listing rules and other strategic and directors’ report requirements.
The factsheet covers both the regulations and the accompanying non-binding guidance issued by BEIS. It also provides practical tips and examples to help preparers meet the relevant requirements and understand potential linkages with other elements of the strategic report. Other useful resources are clearly signposted throughout the factsheet, including on the use of scenario analysis, which is generally considered to be one of the more challenging aspects of the legislation.
“It is widely appreciated that applying the regulations may be challenging for those yet to report under any climate-reporting framework or legislation,” says Laura Woods, Technical Manager in the Financial Reporting Faculty. “Our factsheet aims to help those at an earlier stage in their climate-related reporting journey understand the requirements, become familiar with the resources available and avoid common pitfalls. It is also important to bear in mind that many investors and regulators appreciate that the depth and quality of disclosures on climate matters is expected to develop over time as improvements are made to the information available to management.”
This guidance is created by the Financial Reporting Faculty – recognised internationally as a leading authority on financial reporting. The Faculty formulates ICAEW policy on financial reporting issues and makes submissions to standard setters and other external bodies. Join the Faculty to access exclusive technical resources and practical know-how.
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