The Financial Reporting Council (FRC) has issued a joint statement with other financial regulators, including the Prudential Regulation Authority (PRA), the Financial Conduct Authority (FCA) and the Pensions Regulator (TPR) in response to the UK government’s Green Finance Strategy.

The statement notes that the boards of UK companies have a responsibility to consider their impact on the environment and the likely consequences of any business decisions in the long-term.  It adds: “Reporting should set out how the company has taken into account the resilience of the company’s business model and its risks, uncertainties and viability in both the immediate and longer-term in light of climate change. Companies should also reflect the current or future impacts of climate change on their financial position, for example in the valuation of their assets, assumptions used in impairment testing, depreciation rates, decommissioning, restoration and other similar liabilities and financial risk disclosures.”

The new UK Stewardship Code will require investors to integrate stewardship and investment, taking into account material environmental, social and governance issues, including climate change.

The FRC will monitor how companies and their advisers fulfil their responsibilities, noting that audit monitoring will include consideration of the adequacy of the auditors’ work on principal risk disclosures, including climate risk and the financial statement implications of climate change.

The FRC’s Financial Reporting Lab will provide practical guidance later this year on how companies can best consider and report on climate related risk and opportunities.  The FRC’s project on the Future of Corporate Reporting will also consider the need for improved non-financial/sustainability information from companies.

Sir Win Bischoff, Chair of the Financial Reporting Council said: “The effect of climate change on society and business is one of the defining issues of our time. As well as reporting on their impact on the environment, public companies and their Boards should address the impact of climate change on their business. The FRC is pleased to play its part in supporting the UK’s Green Finance Strategy in co-operation with other regulators.”