Responding to the Government’s consultation on proposals to require mandatory TCFD aligned climate-related financial disclosures, the Institute of Directors urges businesses to move now to implement the common reporting framework.
The adoption of a common reporting standard is a development that is supported by IoD members. In a survey of more than 900 IoD members, 70% expressed support for companies moving to a common reporting standard on disclosures relating to climate change and environmental impact. Additionally, 75% believed either some changes or significant reform to the UK's corporate governance framework is required to take greater account of climate change.
Whilst agreeing that the reporting requirement should initially relate to larger businesses, the IoD is also calling on the government to extend the requirement to a wider range of companies by 2025. The IoD recognises, however, that care must be taken to minimise the burden of immediate reporting requirements on smaller entities, given the disparity in their resources relative to larger enterprises.
The IoD also stresses the importance of sufficient guidance, education, and support for companies and directors to ensure they are able to make meaningful disclosure under a new reporting regime. Businesses and directors should be provided with the skills, data, and perspectives that they need to help them meet the risks and opportunities caused by the climate crisis. The IoD stands ready to work with the government to deliver such a programme.
IoD’s Head of Policy and Corporate Governance, Dr Roger Barker said:
“The climate crisis poses an existential threat to the global economy and wider society. It is therefore imperative that business acts to minimise any further impact on climate trends.
“Many directors already recognise the role that their organisations must play. The government has raised the bar by setting a challenging emissions target, but it can only be achieved if businesses respond, with boards setting a clear direction which is embedded throughout their organisations."
Amin Aboushagor, IoD Policy Advisor, commented:
“Although the voluntary disclosure of climate-related financial information has increased in quantity and quality in recent years, we believe that now is the time to introduce a common reporting framework to support the UK’s transition to net zero and help cement the UK as a global centre of excellence for green finance.”
In 2015, the Financial Stability Board, the international body that monitors and makes recommendations about the global financial system, established the Taskforce on Climate-Related Financial Disclosures (TCFD) to develop recommendations for more effective climate-related disclosures.
In 2017, the TCFD released its final report setting out 11 recommended disclosures structured around four thematic pillars that represent core elements of how organisations operate. Those proposed disclosure categories are as follows:
Disclose the organisation’s governance around climate-related risks and opportunities.
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning where such information is material.
Disclose how the organisation identifies, assesses, and manages climate-related risks.
Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.
As of September 2020, the TCFD recommendations were supported by over 1440 organisations, representing a market capitalisation of over $12 trillion.
For further information, please see the IoD’s full response to the consultation at:
IoD response to TCFD consultation | Institute of Directors | IoD