TCFD-aligned disclosure Exposure Draft for Phase 2
Detail of outcome
The consultation responses were presented to the Financial Reporting Advisory Board’s Sustainability Subcommittee (FRAB-SSC) in March 2024. FRAB-SSC expressed satisfaction with the level of interaction and agreed with the proposed changes. With approval from FRAB, HM Treasury published the TCFD-aligned disclosure application guidance for Phase 1 and 2.
The guidance was updated as follows:
- Scope for central government arm’s length bodies — size thresholds have been clarified to include total operating income and funding received (including grant-in-aid) exceeding £500 million. This is relevant for Arm’s Length Bodies that rely on sponsor departments for income rather than from sales of goods and services.
- Sector specific and industrial grouping - additional guidance clarifying where entities’ operations partially fall into TCFD’s sector and industrial group guidance has been clarified.
- Reporting requirements for principal risks - a table and flow chart have been added to aid preparers in identifying reporting requirements depending on whether climate is a principal risk.
- Reporting boundaries - additional details was added setting out the qualitative and quantitative disclosures, which have been clarified, focusing on entity-level reporting (rather than group-level reporting) for the latter.
- Assurance arrangements – simplified the technical wording on assurance procedures.
- Opportunities - added high-level guidance on reporting climate-related opportunities, leveraging from existing performance reporting principles.
A summary of the consultation and changes, as well as the FRAB-SSC discussion, and tracked updates from the Exposure Draft are included the paper presented to FRAB - refer to FRAB 152 (02).
Detail of feedback received
Nine formal responses were received, including from representatives from ministerial (2) and non-ministerial departments (1), arm’s length bodies (2), devolved executive agencies (1), professional institutes (2) and a public sector training association.
The consultation feedback focused on several key areas, including:
- Income size thresholds
- Sector-specific and industrial groupings
- Materiality assessments
- Principal risk requirements
- Reporting boundaries
- Assurance arrangements
- Linkage to the Government Financial Reporting Manual (or equivalent) and existing requirements for annual reports.
The TCFD-aligned disclosure Exposure Draft for Phase 1 and 2 was presented and discussed at key stakeholder events during the consultation/review period. This collaborative approach was further demonstrated when HM Treasury took the consultation feedback and proposed changes to the TCFD Technical Working Group (TWG), a body comprising cross-public sector annual report preparers and technical experts.
The consultation responses have been summarised in Annex 1a of FRAB 152 (02).
Original consultation
Consultation description
This Exposure Draft is to consult on new climate-related financial disclosures in entity-level annual reports that align with the TCFD’s recommendations.
Introduction
The Phase 2 Exposure Draft addresses the recommended disclosures for the Risk Management and Metrics and Targets pillars of the TCFD framework.
Preparers, experts, and other stakeholders from across central government and the wider public sector are asked to provide feedback on the proposed public sector adaptations, interpretations, and considerations – as well as the overall completeness and clarity of the guidance.
Structure
This application guidance is additive, with Phase 2 expanding on the TCFD-aligned disclosure application guidance for Phase 1. The Phase 1 application guidance was published in July 2023 and addresses the recommended disclosures for the Governance pillar, applying to in-scope central government bodies’ annual reports and accounts from 2023-24.
Remit
This Exposure Draft covers the whole UK public sector, which is the boundary for the Whole of Government Accounts. However, the relevant authority for each jurisdiction within that boundary will have their own due process for proposing and approving changes to their reporting regime. This consultation does not supplant those processes.
The proposed changes are published for comment only. The proposals may be modified before being formally presented to the Financial Reporting Advisory Board (FRAB) for its approval.
Effective date
The proposed effective date for central government bodies is 1 April 2024, with Phase 2 disclosures required in annual reports and accounts for 2024-25 on a comply or explain basis.
Other public sector bodies should follow the direction from their respective relevant authority. Public sector bodies may choose to voluntarily apply this guidance - in full or in part.
Documents
Last updated 15 April 2024 + show all updates
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Summary of consultation responses have been added, alongside the resulting changes to the application guidance.
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First published.