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FCA & FRC: Climate Change, Board Governance and TCFD - the new reality

Nov 2020

Recent announcements have made clear that active management of climate change impacts is to become a statutory Board requirement for all UK listed companies.

On 9 November 2020, the FCA announced that premium listed companies will be required to include a statement in their annual financial report for periods beginning on or after 1 January 2021 consistent with the Task Force on Climate-Related Financial Disclosures framework (TCFD), on a comply or explain basis. This is just the beginning. 

The new requirements will become mandatory and will soon be expanded to all listings.  As the implementation of TCFD is complex and needs to be embedded within an organisation, it is not surprising that companies are being given time to integrate it into their management systems.  Early compliance will also help Directors steer clear of potential actions by climate-related activists under section 172.  

Nikhil Rathi, CEO of the FCA, stated in his speech to an online conference hosted by the City of London:

“And this is just the start. We will follow this up in the first half of next year with proposals to extend the rule to a wider scope of listed issuers. We will also consider further tightening the rule, moving from 'comply or explain' to mandatory disclosure.”

We also saw, on 10 November 2020, the FRC announcing its support for TCFD, encouraging all listed entities to voluntarily report on the 11 recommended disclosures of TCFD using the Sustainability Accounting Standards Board (SASB) metrics.  The FRC is encouraging companies to report on these areas within their next reporting cycle, where possible, and disclosures should be considered in the context of the existing strategic reporting framework in the UK.

SIFA Strategy is a long-term supporter and advisor around TCFD and helps companies to implement and embed TCFD within their business. We have developed a report which outlines the challenge of managing climate change impacts and reiterates the need for Board oversight.

If you would like to know more about TCFD and how it should be implemented as part of your ESG, Board and reporting processes, or click the link to access our full report “Taking Climate Change into the Board”.