This is part 9 of a series of educational posts from the IFoA’s Climate Change Disclosures Working Party about climate reporting topics. Here we focus on the UK: current practices and a brief overview of things to come.
In 2019, the UK government set a ‘net zero target’ to ensure that the UK reduces its greenhouse gas emissions (GHGs) by 100% from 1990 levels by 2050. It made this legally binding with the Climate Change Act 2008 (2050 Target Amendment) Order 2019. The government said the UK was the first major economy to pass a net zero emissions law. However, in 2022, an independent review of progress against the net zero targets1 found that though the UK should be proud of steps taken so far, actions were needed from the government, industry, and individuals.
To help meet its net zero target, the UK government has set out its latest overarching framework for UK climate disclosures regulation: the 2023 Green Finance Strategy2. This brings together the progress on the previous 2019 Green Finance Strategy3 and roadmaps for mandatory climate-related disclosures4 and sustainable finance investing5.
From 6 April 2022, it became mandatory for the largest businesses in the UK to disclosure in line with TCFD’s recommendations. Responsibility for the TCFD regulations for each type of organisation was delegated to the appropriate government bodies and their associated regulators including the FCA, PRA, and the DWP – impacting climate disclosure requirements for companies, insurers, asset managers, and pension schemes. In some cases, this is as a ‘comply or explain’ basis (on why they have ‘complied’ or ‘explain’ why they have not aligned with the disclosure requirements).
The UK government streamlined previous carbon emissions reporting requirements from 1 April 2019 via Streamlined Energy and Carbon Reporting Regulation (SECR). It is mandatory for large businesses (quoted and large unquoted companies) to report annually their energy and carbon emissions, as well as any efficiency measures.
The UK has transposed EU’s Non-Financial Reporting Directive requirements in 2016, which includes disclosing information on ‘environmental matters’.
From 1 July 2023, the FRC’s Technical Actuarial Standard 100 (TAS 100) required all members of the IFoA to consider all relevant material factors and relevant material risks, including climate change. Pensions Schemes Act 2021 has facilitated climate-related regulations, including reporting.
Current disclosure requirements for occupational schemes with assets of over £1 billion. From October 2019, trustees are required to include how they have considered ESG factors within the Statement of Investment Principles.
The ESG Sourcebook sets out requirements for entity and product-level TCFD-aligned reports for insurers, FCA-regulated pension providers, and asset managers for periods from 1 January 2022.
In 2020, the UK government published a 5-year roadmap for the DWP, FCA, PRA, and tPR to implement mandatory disclosure in line with TCFD recommendations, and continues to work towards this.
The UK government set up a Transition Plan Taskforce (TPT) in 2022 to develop best practice for companies and investors seeking to disclose transition plans.
The final Disclosure Framework and Implementation Guidance is due to be published in Autumn 2023, followed by consultations on sector guidance and potential updates to reference ISSB and TPT outputs in 2023 to 2024.
A UK ‘green taxonomy’ is being considered, with consultation expected in autumn 2023.
The UK is expected to endorse the ISSB’s sustainability standards for use in the UK.
There are several ongoing updates from the FCA. Most notably, proposed rules on sustainable disclosure requirements (SDR) are expected to be published at the end of 2023 to protect consumers from greenwashing, increase transparency, and enable more informed decisions.
Updates to the FRC’s UK corporate governance and UK stewardship codes are being considered.
The government opened a review and call for evidence in May 2023 on potential changes to non-financial reporting, which would include climate-related disclosure requirements. We expect further changes to UK adoption of Solvency II directives.
Below is a list of websites we hope you find useful:
Technical Actuarial Standard 100: General Actuarial Standards (version 2.0) - FRC (frc.org.uk)
Governance and reporting of climate-related risks and opportunities - tPR (thepensionsregulator.gov)
What are your thoughts on the points raised in this article?
We would love to hear your views in the comments on the IFoA's Sustainability Finance Community LinkedIn page.
To find out more, visit: Sustainability: research working parties
[1] Mission zero: Independent review of net zero - House of Lords Library (parliament.uk)
[2] Mobilising Green Investment - 2023 Green Finance Strategy (publishing.service.gov.uk)
[3] Transforming finance for a greener future: 2019 green finance strategy - GOV.UK (www.gov.uk)
[4] UK joint regulator and government TCFD Taskforce: Interim Report and Roadmap - GOV.UK (www.gov.uk)
[5] Greening Finance: A Roadmap to Sustainable Investing - GOV.UK (www.gov.uk)
The views expressed in this post are those of the individual authors, and not necessarily those of the Institute and Faculty of Actuaries or those of their employers. Information within this post is correct as at the date of writing (i.e. end of July 2023). Hence, there may be subsequent updates which are not reflected. Any reader should still reference the underlying legislation and standard, and should there be any conflict, the underlying information in the relevant standard or legislation supersedes any information presented in this post.