UK launches consultation on mandatory TCFD reporting
The UK is pushing forward with plans to make TCFD reporting mandatory and wants the changes to come into effect in a little over a year.
In a consultation launched today, the Department for Business, Energy & Industrial Strategy says UK companies with more than 500 employees and traded on a regulated market should be forced to report in line with TCFD recommendations.
‘Although the voluntary disclosure of climate-related financial information has increased in quantity and quality, we believe now is the time to take regulatory action to support the UK’s transition to net-zero and help cement the UK as a global center of excellence for green finance,’ states the consultation.
UK-registered companies listed on London’s Alternative Investment Market with more than 500 employees would also have to produce TCFD-aligned disclosure, as would larger private companies and partnerships, adds the consultation.
Companies would need to disclose around the TCFD’s four pillars of governance, strategy, risk management and metrics & targets, with the information appearing in the strategic report, a document required under UK law. The proposed changes would apply to financial years starting on or after April 6, 2022.
In 2019 a UK government paper called for listed companies and large asset owners to align disclosures with the TCFD recommendations by 2022, and last year UK chancellor Rishi Sunak announced plans to make TCFD reporting compulsory.
Most large UK companies already mention TCFD in their corporate reporting. A study last year finds two thirds of the FTSE 100 index reference TCFD recommendations in their annual reports.
Launched in 2017, the TCFD recommendations have attracted widespread support as a method for disclosing climate-related financial information and encouraging companies to meet the goals of the Paris Agreement on climate change.
Around 1,500 organizations, including more than 1,340 companies, have pledged support for the TCFD framework, according to a status report released last October.
The Climate Disclosure Standards Board has welcomed the announcement from the UK government.
‘Evolving a market to keep pace with today’s sustainability challenges is not easy,’ says Michael Zimonyi, policy and external affairs director at the organization, in a statement. ‘This is an ambitious but proportionate next step to align climate-related financial risk with other business risks in corporate reports.’
The consultation will remain open until May 5.
US regulators are also exploring changes to climate and other ESG reporting rules. Earlier this month, acting SEC chair Allison Herren Lee requested input on climate-change disclosure from investors, companies and other market participants.