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Consultation on climate-related financial disclosures by UK companies

  • United Kingdom
  • Financial services and markets regulation - ESG


The Department for Business, Energy and Industrial Strategy (BEIS) has published a consultation on mandatory climate-related disclosures by certain UK publicly quoted companies, large private companies and LLPs. In summary, the Government is proposing that the companies and LLPs in scope be required to disclose climate-related financial information in line with the four overarching pillars of the task force on climate-related financial disclosures (TCFD) recommendations on a mandatory basis.

The proposals are the latest step in the UK Government’s Green Finance Strategy, which proposed amongst other measures that all listed companies and large asset owners should disclose in line with the TCFD recommendations by 2022.

The Government announced in November 2020 that they intended to make it mandatory for large UK companies and financial institutions to make TCFD aligned climate-related disclosures by 2025, with changes to companies legislation being implemented in 2022 following a consultation to determine the scope of UK companies that would be subject to the new requirements.

What are the TCFD recommendations?

The TCFD recommendations are regarded as one of the most effective frameworks for companies to analyse, understand and ultimately disclose climate-related financial information.

The TCFD was established in December 2015 by the Financial Stability Board to develop a set of voluntary climate-related disclosure standards for companies across all sectors. The Recommendations of the Task Force on Climate-related Financial Disclosures were published in the final report in 2017 to help businesses disclose climate change risks. The recommendations constitute climate-related financial risk disclosures for use by companies in providing information to investors, lenders and insurance underwriters about the financial risks companies face from climate change. The core elements of climate change disclosures recommended by the TCFD are structured around four pillars as set out below: governance, strategy, risk management and metrics and targets, with 11 more specific recommended disclosures that sit under each of the four pillars.



Risk Management

Metrics and Targets

Disclose the organization’s governance around climate-related risks and opportunities.

Disclose the actual and potential impacts
of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.

Disclose how the organization identifies, assesses, and manages climate-related risks.

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

Source: Final Report, Recommendations of the Taskforce on Climate-related Financial Disclosures, June 2017.

Key aspect of the Government’s proposals

The Government is aiming to increase the quality and quantity of climate-related financial disclosures in a manner which is proportionate and does not over-burden companies.

The Government proposes that the following types of entity will be within the scope of the new disclosure requirements:

  • 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 market (ie the main market of London Stock Exchange, but not AIM), banking companies or insurance companies (known as 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 £500 million.
  • LLPs which have more than 500 employees and a turnover of more than £500 million.

Reporting would be at the group level on a consolidated basis and the scope thresholds would also apply on a consolidated basis.

Companies and LLPs in scope will be required to disclose climate-related financial information in line with the four overarching pillars of the TCFD recommendations set out above on a mandatory basis. Further detail of what those disclosures would require is set out below. The implementing regulations will not require or prescribe the disclosure of climate-related financial information in line with the 11 more detailed TCFD recommendations.

The Government proposes that such disclosures should be made 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.

The Government believes that the entities it has set out as being subject to the proposed requirements are “economically significant” and have a material impact on the environment as well as an exposure to climate risk. As such, the Government believes that it is right to extend TCFD disclosure obligations beyond listed companies. The proposed requirements will be monitored by the Financial Reporting Council.

Nature of proposed disclosures

The Government proposes to require in scope companies and LLPs to provide disclosures as outlined below.


  • A description of the governance arrangements in place to identify and manage risks and opportunities arising from climate change.
  • Who has operational responsibility for climate change, including the experience of that executive or committee.
  • If the company has an audit committee, whether climate change is a matter considered by the company’s audit committee.


  • A brief description of the company’s business model and strategy (to the extent that the company is not already required to report such information).
  • A description of how the company’s business model and strategy may change in response to effects relating to climate change, and the trends and factors that affect this change.

Risk Management

  • A description of the principal risks and principal opportunities, including material financial risks and opportunities, relating to transition risk, physical risk and regulatory risk arising from climate change which may affect the business and a description of how the company manages those areas of risk and opportunity including: (i) a description of its business relationships, products and services which are likely to cause adverse impacts in those areas of risk, and (ii) a description of how it manages the principal risks.
  • A description of the risk management policies pursued by the company in relation to climate change, any due diligence processes implemented by the company in pursuance of those policies and a description of the outcome of those policies.

Metrics and targets

  • A description of the key performance indicators relevant to the entity’s exposure to climate change risk and opportunity, and the targets set by the business for those key performance indicators. “Key performance indicators” means factors by reference to which the development, performance or position of the company’s business, or the impact of the company’s activity, can be measured effectively.

Position for listed companies

Companies on the premium list are subject to a new Listing Rules requirement for financial years commencing on or after 1 January 2021 which requires them to include a compliance statement in their annual financial report, stating whether they have made disclosures consistent with the TCFD recommendations or provide an explanation if they have not done (see our briefing here). The FCA require disclosure in line with both the four pillars and 11 recommended disclosures of the TCFD, so go further than the Government’s proposals, but the rules are currently on a “comply or explain” basis. Although there will be overlap between the rules for some companies, the Government believes that the proposed new rules are complementary to the Listing Rules, noting that there will be a “tiering between premium listed companies and those subject to the proposed BEIS requirements”.

Timing and next steps

The consultation sets out the Government’s proposals, and views are now sought on these by 5 May 2021.

Subject to the consultation outcome, amendments will be made by to the Companies Act 2006 by Statutory Instrument in 2021, to come into force on 6 April 2022. The new regulations would apply to accounting periods commencing on or after 6 April 2022.


If adopted, the Government’s proposals will bring a large number of UK entities within the scope of mandatory climate-related reporting from as early as 2022.

In view of the limitations of voluntary reporting, the Government is aiming to significantly increase the number of UK companies that report on climate-related information and risks in order to provide investors and other stakeholders with a greater level of information on climate-related matters. To support the UK’s 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.

Whilst the UK is ahead of many other countries in the area of ESG reporting and disclosure, some UK companies in scope of the proposals may be concerned by the additional burden that will be incurred as a result of the Government’s proposals at a time when businesses are currently facing challenges as a result of the Covid-19 pandemic. However, the Government believes that the proposed regulations will support a competitive and resilient UK economy.

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Consultation on requiring mandatory climate-related financial disclosures by publicly quoted companies, large private companies and Limited Liability Partnerships (LLPs).