FRC finds inconsistent quality in climate-related disclosures

January 22nd, 2025

The Financial Reporting Council (FRC) has found that while companies have made efforts to comply with climate-related financial disclosures requirements, the quality of these disclosures varies significantly.

In a review of disclosures from Alternative Investment Market-listed businesses and large private companies after the first cycle of mandatory reporting, the FRC highlighted opportunities for preparers to deliver more consistent, coherent, and concise disclosures.

The report revealed a need for improvements in disclosures related to climate-related targets and the use of key performance indicators to assess progress. Only half of the companies provided complete information, and for some, it was unclear whether targets existed but were not disclosed, or if no targets had been set at all.

While most companies disclosed climate-related risks, opportunities were often overlooked, and the timeframes for assessing these risks and opportunities were not consistently provided.

In addition, some companies voluntarily aligned their disclosures with the TCFD framework, but many failed to present one or more of the disclosures required by the rules.

Under the requirements, companies must analyse the resilience of the company’s business model and strategy under various climate-related scenarios.

Even though the FRC acknowledged that this disclosure is challenging to produce and will likely develop over time, it was disappointed that several companies failed to provide any analysis and others offered disclosures that lacked sufficient company-specific detail.

The FRC reminded preparers that effective climate-related financial disclosures do not need to be long or complex. In fact, better disclosures were generally more concise and often included tables or diagrams to convey information clearly.

It also said it expects the quality of companies’ disclosures to improve after the first year of application and will consider this in its future communications with companies.

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