On 22 October 2019, the FRC's Financial Reporting Lab published a report on climate-related corporate reporting. It contains guidance for companies on how they can improve their reporting of climate change information in order to meet the expectations of investors and the broader financial system, allowing for more informed decisions about capital allocation and the ability to price risk.
The report highlights areas of reporting which investors believe could be more effective and comprehensive, including how boards consider and assess climate change, operational risks and strategies to capitalise on the changing climate and related opportunities.
The report also discusses the Task Force on Climate-related Financial Disclosures (TCFD), which was established by the Financial Stability Board with a focus on how the financial sector can take account of climate-related issues. The report recommends companies use the TCFD as a framework for thinking about and reporting on climate change. The Lab has also developed a series of questions companies should ask to address the areas that investors seek to understand.
The report views investors as part of the solution to managing climate change, since investors are also under pressure to report on climate change issues under new regulations and client requests. Easier access to information will aid investors carrying out their own reporting.
Regulatory requirements are also considered in the report, such as the requirement of boards to consider the company's long term success in relation to environmental matters, for example when discharging their duties under the Companies Act 2006 and under the UK Corporate Governance Code.
The full report can be found here.
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