On 26 July 2023, the Financial Reporting Council (FRC) published a thematic review which assesses the quality and maturity of climate-related metrics and targets disclosures. The review analysed Taskforce on Climate-related Financial Disclosures (TCFD) disclosures from twenty companies’ 2022 annual reports across four sectors – materials and buildings, energy, banks, and asset managers – and identified areas of better reporting practice as well as opportunities for improvement.

Key findings showed an incremental improvement in the quality of companies’ disclosure of net zero commitments and interim emissions targets. However, disclosures of concrete actions and milestones to meet targets were sometimes unclear, and comparability of metrics between companies remains challenging. The review found that, given the large volume of information presented, many companies are finding it challenging to explain their plans for transitioning to a low-carbon economy clearly and concisely.

The review also found that explanations of how climate targets affect financial statements still need improvement; for example, boilerplate language on climate being ‘considered’ provides little insight on impacts.

Commenting on the thematic review, the FRC’s executive director of regulatory standards, Mark Babington, said: “This review highlights the continued need for clearer, more decision-useful disclosures of companies’ plans to transition to a low-carbon economy. We encourage companies to focus on explaining targets, actions, and any impacts on the financial statements.”