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Government consults on introduction of climate reporting for large private companies

Published April 7, 2021

Government consults on introduction of climate reporting for large private companies

The UK government is considering whether to make it compulsory for large private companies to disclose climate-related financial information.  

The Department for Business, Energy and Industrial Strategy (BEIS) has launched a consultation on proposals requiring quoted and large unquoted companies to report on climate-related risks in their annual reports. If accepted, the first reporting period would begin in exactly a year’s time.  

The proposals build on the expectation that all listed companies and large asset owners should disclose in line with the Treasury’s Task Force on Climate-related Financial Disclosure (TCFD) recommendations by 2022. The UK would then be the first G20 country where climate-related disclosures are compulsory across its economy.  

Under the proposed rules, all UK quoted companies with more than 500 employees or UK registered companies which have more than 500 employees and a turnover of more than £500m would be expected to disclose material climate-related financial information. The regulations are likely to come into force on 6 April 2022 and would apply for accounting periods from that date.  

These companies will be required to report in the non-financial information statement which forms part of the Strategic Report. LLPs will also be able to report in the Energy and Carbon Report which forms part of their Annual Report. The reporting framework would cover three areas set out by the TCFD: governance, strategy, risk management, and metrics and targets.   

 “Companies and stakeholders are placing increasing importance on disclosures relating to climate risks and opportunities,” commented Alfa Energy’s compliance and carbon reporting manager, Nikki Wilson. “As part of their business decisions, investors need to consider that both physical and transition risks can impact the value of companies and their assets. With the launch of this consultation, the UK government seeks to achieve their goal of being the first G20 country to make climate-related financial disclosures mandatory across the economy. Mandatory disclosures increase the availability of relevant information and ease the direct comparison of companies’ data, due to the fact that reporting has been structured according to the same framework. The Climate Change Committee, when advising Ministers on the 6th Carbon Budget, highlighted the importance of disclosure to smooth the transition to net zero. This is because increased transparency influences the behaviour of both companies and their stakeholders.”