UK is set to become the first G20 country to enshrine in law mandatory Taskforce on Climate-related Financial Disclosures (TCFD)-aligned requirements for Britain’s largest companies and financial institutions to report on climate-related risks and opportunities, the government has announced.
From 6 April 2022, over 1,300 of the largest UK-registered companies and financial institutions will have to disclose climate-related financial information on a mandatory basis – in line with recommendations from the Task Force on Climate-Related Financial Disclosures.
This will include many of the UK’s largest traded companies, banks and insurers, as well as private companies with over 500 employees and £500 million in turnover.
Energy and Climate Change Minister Greg Hands commented on the announcement: “If the UK is to meet our ambitious net-zero commitments by 2050, we need our thriving financial system, including our largest businesses and investors, to put climate change at the heart of their activities and decision making.
“By mandating large businesses to disclose their climate risks and opportunities – the first G20 country to do so – we are showing global leadership by making our financial system the greenest in the world.”
These disclosure requirements have been based on the recommendations of TCFD – a taskforce set up in 2015 by the Financial Stability Board (FSB) to improve and increase reporting of climate-related financial information.
The disclosures bring together both the Chancellor’s November 2020 Roadmap towards mandatory climate related disclosures and the Roadmap on new Sustainability Disclosure Requirements published last month.
Following widespread stakeholder support and feedback gathered as part of the UK government consultation on proposals to require mandatory TCFD-aligned climate-related financial disclosures, which ran from March until May 2021, two key changes have been made:
- Firstly, the UK government is introducing a requirement for qualitative scenario analysis – a ‘powerful tool’ to support companies in their assessment of climate-related risks and opportunities.
- Secondly, the requirements will be more closely aligned with the recommendations of the TCFD, to ensure coherence with associated requirements introduced by the Financial Conduct Authority and the Department for Work and Pensions.
The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021 are due to be laid on 28 October 2021, with the regulations coming into force for accounting periods starting on or after 6th of April 2022, subject to parliamentary scrutiny.
Companies already providing TCFD-aligned disclosures include Tesco, Aviva, and Unilever.
According to the government, non-mandatory guidance to support in-scope companies in their disclosure will be issued before the end of the 2021, following parliamentary scrutiny of the regulations.