Building on the work of the Task Force on Climate-Related Financial Disclosures (TCFD), the London Stock Exchange has created a practical guide to help listed and AIM companies effectively disclose and communicate their approach to climate change, their strategies and how they are managing associated risk and opportunity.
More than 2000 companies representing in excess of $20 trillion in market capitalisation have announced their support for TCFD and there is widespread recognition for the need for clear, consistent and decision-useful information from companies on climate-related information.
There is an increasing demand for companies to disclose more precise details of their climate strategy and carbon emissions and regulators are consulting/amending their rules to provide for this in line with the Government's Green Finance Strategy and its roadmap towards mandatory climate-related disclosures.
Last year, the FCA introduced rules requiring UK and overseas commercial companies with a premium listing to make disclosures in line with TCFD on a ‘comply or explain' basis for financial years beginning on or after 1 January 2021. In addition, the FCA proposes to extend climate-related disclosure rules to companies with a standard listing and to asset managers, life insurers and FCA regulated pension providers.
Building on these steps, BEIS consulted, earlier this year, on mandatory climate-related financial disclosures for large UK corporates including AIM companies with more than 500 employees. We await the outcome of this consultation but amending legislation should be made in 2021 which will apply for accounting periods beginning on or after 6 April 2022.
The guide to climate reporting is intended to support best practice and to educate companies on how they can implement the TCFD recommendations. It recommends a three-stage process to integrate and communicate climate-related information:
Step 1 – disclosure diagnosis and context
Step 2 – integration of climate-related risks and opportunities
Step 3 – disclosure of climate-related practices and data
The guide has been published as part of the LSE's London climate transition offering – a new website designed to help organisations prepare their business for transition to low-carbon. The website contains training videos, access to the Climate Governance Score to help organisations assess where they are on the journey relative to industry peers and associated guidance.
This guide complements the LSE's previous publication: Revealing the full picture: Your guide to ESG reporting
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