UK first G20 country to require ESG reporting on TCFD

Ahead of COP26, the UK has announced it will become the first country to pass legislation to mandate climate change TCFD disclosures for Britain’s largest companies and financial institutions from April 2022. The Taskforce on Climate-Related Financial Disclosures (TCFD) is an environmental reporting framework which helps companies report consistent climate risks and opportunities, forming part of a broader effort to standardise ESG reporting which is only likely to increase after Glasgow.

The new requirements will come into effect on 6 April 2022, and require over 1,300 of the largest UK-registered businesses required to disclose climate-related financial information. This will include many of the largest companies, including banks, insurers as well as private businesses with over 500 employees and £500 million in turnover.

TCFD is an industry-led group which helps investors understand the financial impact of climate risks. It was launched at COP21 in Paris in 2015, and the adoption of it as part of the UK’s company disclosure information will help ensure the largest companies are required to think seriously about the risks of climate change. They will have to consider emission reduction plans and sustainability programmes, and go beyond paying lip service to the UK’s net-zero commitments.

Beyond COP26: What new ESG regulations are coming after Glasgow?

This new law is perhaps one of the most significant ESG-related mandatory disclosure rules to yet be introduced. The EU is moving ahead with their corporate due diligence and corporate accountability directive, which will require businesses to identify, address and remedy their impact on human rights and the environment. However those rules are not expected to come into force for the next several years.

In the US, the SEC has been consulting on mandatory climate disclosures, as well as broader ESG disclosures. Gary Gensler, chair of the U.S. Securities and Exchange Commission, has been unequivocal about his intention to bring transparency and credibility to ESG investments in the United States.

Globally, the International Financial Reporting Standards (IFRS) Foundation is considering how to engage with ESG reporting. Its financial reporting standards, developed and approved by the International Accounting Standards Board (IASB), are mandatory in more than 140 jurisdictions. The IFRS is keen to set sustainability reporting standards which will likely go beyond climate-related disclosures. Material non-climate ESG issues such as human rights, diversity, equality and health and safety will also need reporting standards so companies can disclose comparable information.

What are the UK’s new environmental ESG regulations?

Whilst the new mandatory TCFD disclosure rules are the most significant ESG standards to date, the UK already has a series of piecemeal ESG-related disclosures. This includes equal pay disclosures and requirements for strong compliance programmes for governance issues such as bribery and tax evasion. There are new requirements for occupational pension trustees to report on climate change impacts and new rules for due diligence on potential deforestation risks for companies that have high risk products like palm oil in their supply chain.

Additionally, the Taskforce on Nature-related Financial Disclosures (TNFD), was set up in 2020 and has been enforced by the G7 finance ministers and the G20 sustainable finance roadmap. The initiative aims to secure and protect the natural environment, given that more than half of the world’s economic output is dependent on nature. Financial institutions and companies don’t have access to data to understand how nature impacts their immediate financial performance or longer-term financial risks. TNFD seeks to improve that with mandatory disclosures. Given the UK is pushing ahead with TCFD, it seems likely that TNFD will follow in the near future.

What should I know about business and the environment?

VinciWorks is hosting a webinar on 17 November to dissect and discuss international commitments and potential new areas of regulation following the COP26 summit in Glasgow. Joining us for this webinar will be James Alexander, Chief Executive of the UK Sustainable Investment and Finance Association. As well as the impact of COP26, we’ll hear from James about ethical investing and how businesses can set themselves apart through net-zero commitments and ESG compliance. You can also listen again to our previous webinar on ESG: a new era in corporate accountability.

The webinar will cover:

  • Current environmental regulations for businesses and what might change
  • The impact of COP26 on compliance
  • How companies can work towards net-zero
  • Understanding ESG reporting and preparing for ESG regulation
  • Setting up an environmental compliance programme

Free registration

Is there training available on ESG?

ESG training screenshot

We will be releasing a new course on ESG awareness. Designed for all staff, it will help everyone in the company understand what ESG is, how it impacts them, and how they can help the business meet its ESG obligations and priorities. The course comes complete with a customisation wizard, allowing admins to instantly upload their company logo and edit any of the content within the course.

Complete the short form below to learn more about the course and get updated when it is released.