Mandatory Climate-Related Financial Disclosure – also known as Mandatory Climate Risk Reporting, is coming into effect in the UK. If you want to know how this will affect your company, whether you fall into scope, and what you have to do, read on.
Britain is set to become the first G20 country to create mandatory climate risk and opportunity reporting laws. Companies affected include the largest publicly traded companies, the largest private companies, and financial institutions such as banks and insurance companies.
Following scrutiny from parliament the new laws will go into effect from April the 6th, 2022.
These new laws are aligned with the TCFD’s (Task-Force on Climate-Related Financial Disclosures) recommendations. The TCFD was launched during the Paris COP21 in 2015 and its focus is on setting up voluntary standards for clear-and-consistent reporting from companies on their climate risk and exposure. This gives investors and clients an easy way to examine partaking companies and see if they are a good fit.
Since the TCFD’s inception, a growing number of companies have begun to voluntarily publish this information in line with the TCFD’s recommendations. For companies which are performing well in this regard, the benefits of publishing this information are significant. Early adopters include Tesco, Aviva and Unilever, who have been voluntarily publishing this information for some time now.
Benefits include eligibility for government tenders, more favourable views from potential investors, and increased public perception, to name a few.
Many companies are struggling to understand and properly disclose, as this is new ground for many. In that regard, we’re here to help. CO2analysis can perform a complete Climate Disclosure check for your company, regardless of size, and including your supply chain – which is generally the most difficult portion to perform a current-and-transitory climate risk analysis on.
Simply book a free demo and we will go over this with you, or contact us here: [email protected]
If you’re uncertain as to whether your company falls into scope or not, we have the scope criteria below, taken from the gov.uk upload.
The disclosure requirements will apply to your company or LLP if it meets the following scope criteria:
All UK companies that are currently required to produce a non-financial information statement, being UK companies that have more than 500 employees and have either transferable securities admitted to trading on a UK regulated market or are banking
companies or insurance companies (Relevant Public Interest Entities (PIEs));
UK registered companies with securities admitted to AIM with more than 500 employees;
UK registered companies not included in the categories above, which have more than 500 employees and a turnover of more than £500m;
Large LLPs, which are not traded or banking LLPs, and have more than 500 employees and a turnover of more than £500m and;
Traded or banking LLPs which have more than 500 employees.
Even if you don’t yet fall under the scope, its recommended to try to get to grips with the disclosure rules and begin disclosing regardless, as getting in early will only benefit you.
For companies required to disclose or those interested in doing so, the TCFD has some very useful resources. They provide simple workshop-presentations which expand on the requirements put forward by the government, explaining exactly what is required for each section.
Below is the information companies and LLPs are required to disclose, divided based on which workshop arena they fall into.
(a) a description of the governance arrangements of the company or LLP in relation to assessing and managing climate-related risks and opportunities;
(b) a description of how the company or LLP identifies, assesses, and manages climate-related risks and opportunities;
(c) a description of how processes for identifying, assessing, and managing climate-related risks are integrated into the overall risk management process in the company or LLP;
(d) a description of—
(i) the principal climate-related risks and opportunities arising in connection with the operations of the company or LLP, and
(ii) the time periods by reference to which those risks and opportunities are assessed;
(e) a description of the actual and potential impacts of the principal climate-related risks and opportunities on the business model and strategy of the company or LLP;
(f) an analysis of the resilience of the business model and strategy of the company or LLP, taking into consideration of different climate-related scenarios;
METRICS AND TARGETS
(g) a description of the targets used by the company or LLPs to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and
(h) the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and a description of the calculations on which those key performance indicators are based.
Hopefully you feel you now have a better idea of what you need to do to disclose your company in line with the new regulations. But keep in mind, you can always come to us for help.
If you want to read about our service, the climate disclosure check-up, go here.
If you want to book a demo and get the process started, go here.