Government releases consultation on requiring mandatory climate-related financial disclosures for companies.

Government releases consultation on requiring mandatory climate-related financial disclosures for companies.

The government has released a consultation seeking views on proposals to mandate climate-related financial disclosures by publicly quoted companies, large private companies and Limited Liability Partnerships (LLPs).

The government explained: “to support the transition to net zero, the Government considers it important to ensure that companies with a material economic or environmental impact or exposure assess, disclose and ultimately take actions against climate-related risks and opportunities by publicly quoted companies, large private companies and Limited Liability Partnerships (LLPs).”

A summary of the proposals:

  • Scope: For the following entities to be within scope for the disclosure requirements proposed in this document:
    • 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 transferable securities admitted to trading on a UK regulated market10, 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 which are not included in the categories above, which have more than 500 employees and a turnover of more than £500m.
    • LLPs which have more than 500 employees and a turnover of more than £500m.
  • Mechanism: For changes to be implemented through a Statutory Instrument, using powers under the Companies Act 2006, and powers under the Limited Liability Partnerships Act 2000.
  • Location of disclosures: Companies will be required to report climate-related financial information in the non-financial information statement which forms part of the Strategic Report. LLPs will be required to report climate-related financial information in either the non-financial information statement which forms part of their Strategic Report or the Energy and Carbon Report which forms part of their Annual Report.
  • Disclosure requirements on companies and LLPs: To require companies and LLPs to disclose climate-related financial information in line with the four overarching pillars of the TCFD recommendations on a mandatory basis (Governance, Strategy, Risk Management, Metrics & Targets).
  • Timing: Regulations are to be made by the end of 2021, with regulations coming into force on the Common Commencement Date of 6th April 2022, and to be applicable for accounting periods starting on or after that date.
  • Guidance: Non-binding Q&A will be produced to support companies in their application of these requirements.

Subject to consultation, and Parliamentary approval the rules would come into force on the Common Commencement Date of 6th April 2022. Accounting periods starting on or after 6 April 2022 will need to be compliant with these regulations.

James Brooman, Technical Consultant at Elmhurst Energy Consultancy commented: "we welcome the release of this consultation, which demonstrates further commitment to increasing the accountability companies have in relation to their impact on the environment. This consultation may pave the way for future expansion of Streamlined Energy and Carbon Reporting, as a pre-existing mechanism that could be utilised to drive forward any outcomes from this consultation."


View the consultation


Article published 26/04/21

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