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FRC Thematic Review Calls for Clearer Climate Reporting

The Financial Reporting Council (FRC) has released its thematic review, aimed at assessing the quality and maturity of climate-related metrics and targets disclosures among various companies. In a comprehensive analysis, the FRC examined the Task Force on Climate-related Financial Disclosures (TCFD) reports from 20 companies’ 2022 annual reports across four sectors: materials and buildings, energy, banks, and asset managers. The findings of the review shed light on both positive developments and areas that require improvement. One significant highlight of the review is the steady improvement in the quality of companies’ disclosure of net zero commitments and interim emissions targets. This signals a growing awareness and commitment to addressing climate change within the business community. However, the report also highlighted certain shortcomings, such as unclear disclosures concerning concrete actions and milestones to achieve these targets. Additionally, comparability of climate-related metrics between companies remains a challenge, making it difficult for stakeholders to gauge relative performances effectively. Another critical aspect brought to light by the review is the need for companies to improve their explanations of how climate targets impact their financial statements. The use of vague and generic language, such as climate considerations merely being “considered,” fails to provide investors and the public with valuable insights into the true financial implications of climate change. Mark Babington, FRC’s Executive Director of Regulatory Standards, said: “This review highlights the continued need for clearer, more decision-useful disclosures of companies’ plans to transition to a low-carbon economy. We encourage companies to focus on explaining targets, actions, and any impacts on the financial statements. 

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