The Climate-related Financial Disclosure became a mandatory requirement for companies required to present a strategic report for the financial year starting on or after 6th April 2022.

All UK companies (quoted companies, large unquoted companies, or large LLP) that are currently required to produce a non-financial information statement will need to disclose how climate-related risks are identified, accessed, and managed. The actual and potential impacts of these risks are to be analyzed, and KPIs should also be used to set targets and gauge performance. This will form part of your organization’s Non-Financial and Sustainability Information Statement in your 2023 energy and carbon report.

According to the department for business, energy, and industrial strategy, it comprises of identifying the physical and transition risks of climate change on investment and business decisions. Climate change has resulted in higher average temperatures which pose physical risks such as the increased frequency and severity of extreme weather events which could affect the organization’s operations. To address climate change, the government has introduced certain regulations and strategies, for example the net-zero strategy, which will drive a change in technology, markets, policies and customer sentiment. The risks associated with this transition will need to be addressed.

It is intended that this disclosure will help companies identify the impacts, risks and opportunities associated with climate change and make relevant decisions on what can be done to address these for the organization, operations, and people. It will also better equip investors and provide greater information to other stakeholders.