From 2022, all premium listed companies must report in line with the TCFD Recommendations and TCFD Recommended Disclosures on climate-related reporting, on a comply or explain basis, and include a statement in their annual report to that effect. See our client guide for more information.
The TCFD Framework
The most widely adopted climate-related reporting framework is the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD and the TCFD Recommendations). The TCFD Recommendations are structured around four thematic areas:
- Governance: Disclose the organisation’s governance around climate-related risks and opportunities.
- Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material.
- Risk management: Disclose how the organisation identifies, assesses and manages climate-related risks.
- Metrics and targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.
New LR 9.8.6(8) requires premium listed UK-incorporated companies (to include in their annual report:
- a statement setting out whether the annual financial report includes climate-related financial disclosures consistent with the TCFD Recommendations and TCFD Recommended Disclosures and where in its annual financial report the climate-related financial disclosures can be found;
- where a company has included climate-related financial disclosures consistent with the TCFD Recommendations and TCFD Recommended Disclosures in a separate document (ie sustainability report or climate change report) rather than the annual report itself, the annual report should set out: (i) which disclosures where made in the separate document: (ii) where the document can be found: and (iii) why the disclosures were dealt with separately; and
- where a company has not included climate-related financial disclosures consistent with all of the TCFD Recommendations and TCFD Recommended Disclosures in either its annual financial report or other document, the annual report shall explain: (i) which recommendations/ disclosures have not been included; (ii) the reasons for not including such disclosures; and (iii) any steps the company is taking or plans to take in order to be able to make those disclosures in the future, and the timeframe within which it expects to be able to make those disclosures. Overseas companies with a premium listing are subject to the same requirements under LR 9.8.7.
Governance and policy mapping
Disclosure obligation mapping
1. Based on responses of 64 companies FTSE 350 companies in November 2020.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021