TCFD-aligned disclosure guidance for public sector annual reports

This application guidance supportsis publicfor sectornew bodies to include climate-related financial disclosuresdisclosures, inincorporating theirthe annualTCFD reports,recommendations ininto linecentral withgovernment theand Taskpublic Forcesector onannual Climate-related Financial Disclosures (TCFD) framework.reports.

Who this applies toScope

TheThis application guidance applies to all ministerialdepartments (ministerial and non-ministerialnon-ministerial), departments, as well as othersome central government (e.g., larger Arms Length Bodies) and wider public sector bodies that meet certain criteriacriteria, or arewhere they have been directed to follow itthis guidance by their respective relevant authority or parent department. Other central government and public sector bodies may choose to applyvoluntarily thefollow this guidance voluntarily,- in full or in part.

WhenBest thispractice appliesexamples fromon sustainability reporting

HM Treasury has adoptedpublished best practice examples on sustainability reporting separately, including on TCFD-aligned disclosure.

Timing

Effective Date

HM Treasury has set out a three-year phased implementation approach for central government. Phase 1 applied to implementation2023-24 forannual centralreports government,and onaccounts, Phase 2 to 2024-25, and Phase 3 to 2025-26 (on a ‘complycomply or explain’explain basis.basis). Other public sector bodies should follow the direction setfrom by their respective relevant authority^[1].

What the requirements are

Phase 1 (2023-24)

In-scope reporting entities must include the following in their 2023-24 annual reports and accounts:reports:

• a TCFD Compliance Statement -– summarising compliance,the anyextent gaps,to which the guidance has been complied with, the reasons for non-compliance, and providing an overview of plans for improvement

  future reporting.

• TCFD’s Governance recommended disclosures, disclosures:

  including:

(a) describe the board’s oversight of climate-related risks and opportunitiesissues.

(b) describe management’s role in assessing and managing climate-related issuesissues.

• TCFD’s Metrics and Targets disclosures:recommended disclosure:

(b) disclose Scope 11, andScope 22, greenhouseand, gasif appropriate, Scope 3 Greenhouse Gas (GHG) emissions, and the related risks -aligning with Scopeexisting 3GHG emissions wherereporting theymethodologies arewhere deemed materialappropriate^[2].

• TCFD’s Risk Management disclosures:recommended disclosures:

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

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

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

• Plus, a description of the climate-related risk, in line with existing performance reporting expectations.requirements. IfWhere climate is not designated a principal risk, thisreporting entities must bearticulate explained.

Where climate is a principal risk or the related information is considered material (e.g., climate-related opportunities):

• TCFD’s Metrics and Targets disclosures:recommended disclosures:

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

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

Phase 3 (2025-26)

Phase 3 expands on the existing reporting requirements for Phase 1 and Phase 2. 2, and requires in-scope reporting entities to include the following in their 2025-26 annual reports (on a comply or explain basis):

Where climate is a principal risk, a significant component of another principal risk or the information is otherwise deemed material in-scope reporting entities must include::

• TCFD’s Strategy disclosures:recommended disclosures:

(a) ondescribe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.

(b) ondescribe the impact of climate-related risks and opportunities on the organisation’s operations, strategy, and financial planning.

(c) ondescribe the resilience of the organisation’s strategy, taking into consideration different climateclimate-related scenarios.

The application guidance for Phase 3 combines all three phases into a single complete document. This follows the consultation on the TCFD-aligned disclosure Exposure Draft for Phase 3 over summer 2024. The responses and the resulting modifications have been summarised on the consultation page.

^{[1] Each relevant authority sets the requirements for entities in their jurisdiction, including HM Treasury for central government bodies, other national governments for their Arms-Length Bodies (ALBs) in the devolved administrations (Scotland, Wales and Northern Ireland), the Department for Health and Social Care (DHSC) for NHS bodies, and CIPFA-LASAAC for local government.}

^{[2] For central government, this aligns with existing requirements in the Sustainability Reporting Guidance (SRG). No additional mandatory reporting on Scope 3 GHG emissions are being introduced in this application guidance.}

^{[3]The application guidance for Phase 2 was published on 21 March 2024, following a public consultation on the exposure draft.}