TCFD-aligned disclosure application guidance for public sector annual reports

This TCFD-alignedapplication disclosureguidance is for new climate-related financial disclosures which incorporate the TCFD recommendations into entity-level annual reports.

Effective Date

HM Treasury has set out a three-year phased implementation approach for central government. The Phase 1 application guidance applies to reporting2023-24 periodsannual reports and accounts. Phase 2 and Phase 3 requirements will be introduced in 2024-25 and 2025-26 respectively (on a comply or explain basis).

Other public sector bodies should follow the direction from 2023-24.their respective relevant authority.

Scope

This guidance applies to all departments (ministerial and non-ministerial), as well as some central government and wider public sector bodies that meet certain criteria, or where they have been directed or instructed to follow this guidance by their respective relevant authority.

Other central government and public sector bodies may voluntarily choose to voluntarily follow this guidance - in full or in part.

Phase 1

HMThis Treasuryguidance hasaddresses setthe outreporting arequirements three-yearfor phasedthe approachfirst toyear implementof thedisclosure. TCFDPhase recommendations1 inrequirements centralare governmentmandated annualfor reportsdepartments and accounts.

Phaselarger 1

Thiscentral guidancegovernment setsbodies’ outannual thereports disclosureand requirementsaccounts forfrom the first year of implementation. 2023-24.

In-scope reporting entities must include the following TCFD-related information in their annual reports:

• a TCFD Compliance Statement – summarising the extent thisto which the guidance has been complied with, the reasons for non-compliance, and providing an overview of plans for future reporting.

• the TCFD Governance recommended disclosures, including:

(a) adescribe description of the board’s oversight of climate-related issues.

(b) adescribe description of management’s role in assessing and managing climate-related issues.

• and,

  Phase where2

  An availableExposure asDraft partfor Phase 2 has been published for public consultation (closes Monday 26 February 2024).

  The Exposure Draft sets out the disclosure requirements for year two on the Risk Management and Metrics and Targets pillars of anthe entity’sTCFD framework. Phase 2 requirements will be mandated for departments and larger central government bodies’ annual reports and accounts from 2024-25.

  This application guidance is additive, with Phase 2 expanding on the existing reporting processes,requirements for Phase 1. The Phase 2 Exposure Draft requires in-scope reporting entities to include the following TCFD-related information in their annual reports (on a comply or explain basis):

  • the TCFD Risk Management recommended disclosures:

  (a) describe the organisation’s processes for identifying and assessing climate-related risks.

  (b) describe the organisation’s processes for managing climate-related risks.

  (c) describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management.

  • the TCFD Metrics and Targets recommended disclosuredisclosures:

  (a) (bdisclose -the adapted).metrics Specifically,used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process.

  (b) disclose Scope 1, Scope 2, and, if appropriate, Scope 3 (businessGreenhouse travelGas only)(GHG) greenhouseemissions, gasand (GHG)the emissions.related Thisrisks -aligning with existing GHG emissions reporting methodologies where appropriate.¹

  (c) describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.

  ^{1 For central government, this aligns with existing requirements in the Sustainability Reporting Guidance (SRG).}

Phase 2No andadditional mandatory reporting on Scope 3 GHG emissions (in addition to business travel) are being introduced in this Exposure Draft. Further detail are included in the guidance.

Phase 3

ApplicationExposure drafts and application guidance for upcomingPhase phases3 will be published in due course. Please refer to the Financial Reporting Advisory Board (FRAB) minutes for updates.