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Climate-related financial disclosures for Large Private Companies and LLPs

What you need to know

Who will this affect and when?


On 17 January 2022, the Department for Business, Energy & Industrial Strategy (BEIS) approved mandatory climate-related financial disclosure requirements (link here). The requirements take effect for accounting periods commencing on or after 6 April 2022 and apply to all UK-registered private limited companies and LLPs that have over 500 employees and a turnover greater than £500m.

Also in scope are all UK-registered companies currently required to produce a non-financial information statement, all UK-registered companies with securities admitted to AIM and more than 500 employees and all traded or banking LLPs with more than 500 employees. Parent companies and LLPs should take account of the number of employees and net turnover of all subsidiary companies to assess whether they meet the threshold. Subsidiary undertakings are exempt where the parent company makes the disclosures at group level.

The required disclosures are broadly aligned to the recommendations of the Task Force for Climate-Related Financial Disclosures (“TCFD”) but are not identical. Companies should include eight new climate-related financial disclosures within their Non-Financial Information Statement, which has been renamed by the legislation to become the Non-Financial and Sustainability Information statement (“the NFSI statement”). LLPsmust report these disclosures in either their Strategic Report (if prepared) or in their Energy and Carbon Report which forms part of their Annual Report.

Required disclosures


The following requirements a) to d) must be disclosed, no exceptions:

a) a description of the governance arrangements of the business in relation to assessing and managing climate-related risks and opportunities.

The persons or committees responsible for identifying, considering and managing climate-related risks and opportunities should be clearly identified. Disclosure should also be made of how frequently these matters are considered.

b) a description of how the business identifies, assesses, and manages climate-related risks and opportunities.

Disclosures should include:

  • the extent to which climate-related risks and opportunities are considered at group and subsidiary level; and
  • how frequently these processes are required to be refreshed.

c) a description of how processes for identifying, assessing, and managing climate-related risks are integrated into the overall risk management process in the business.

This description should highlight how climate-related risks and opportunities contribute to decision-making across the business.

d) a description of:

  1. the principal climate-related risks and opportunities arising in connection with the operations of the business, and
  2. the time periods by reference to which those risks and opportunities are assessed.

A robust climate risk management system with sufficient oversight at board level should enable the identification of the principal climate-related risks and opportunities in the short-term, medium-term and long-term. Each of these time periods should be clearly defined. Disclosure of each of these risks and opportunities should include any mitigations already in place or that are planned for future implementation.

The remaining requirements e) to h) may be omitted if they are “not necessary for an understanding of the business”. However, a clear and reasoned explanation for any omissions must be provided by the directors in the NFSI statement (or by members in either the Strategic Report or Energy and Carbon Report):

e) a description of the actual and potential impacts of the principal climate-related risks and opportunities on the business model and strategy of the business.

“Principal” climate-related risks are those that have the potential to have a material impact on the strategy of the business. Descriptions should be as granular as is necessary to enable the readers of the accounts to understand the potential impact of that specific risk or opportunity.

f) an analysis of the resilience of the business model and strategy, taking into consideration of different climate-related scenarios.

The analysis should consider a range of different climate change scenario projections. The assessment performed under requirement d) on the nature of the risks and opportunities facing the business should be utilised to determine the most appropriate choice of scenarios. For instance, if the entity’s risk assessment has indicated that the business has high exposure to physical risks such as coastal flooding, then a warmer scenario that includes rises in sea levels might be considered. An extensive use of assumptions and estimates in completing the scenario analysis exercise is expected and disclosure of these assumptions and estimates should be made to enable readers to judge whether they are reasonable and in line with similar entities. Scenario analysis disclosures do not have to include quantitative measures and can currently be performed in qualitative terms. General guidance on best practice for scenario analysis has been provided by the TCFD (link here).

g) a description of the targets used by the business to manage climate-related risks and to realise climate-related opportunities and of performance against those targets.

Businesses may consider incorporating these targets into a comprehensive transition plan mapped onto identified risks and opportunities. Targets should be disclosed with a timeframe of when the business intends to meet those targets and how such progress is monitored and assessed, providing a clear action plan to stakeholders.

h) the key performance indicators used to assess progress against targets to manage climate-related risks and realise climate-related opportunities and a description of the calculations on which those key performance indicators are based.

Annual progress in meeting each of the targets included in disclosure g) should be assessed via climate-related key performance indicators (KPIs).

Act now to prepare for these new requirements


Climate change poses risks and opportunities to all businesses, including private companies and LLPs, and could have material impacts on their value, both in terms of the physical risks arising from climate change and the transition risks arising in adapting towards a low-carbon economy.

A focus on producing strong disclosures in response to the BEIS requirements can help businesses in a number of ways: businesses can prepare themselves for what the changing climate will mean for them, assess what they need to do to address climate-related impacts, risks, and opportunities applicable to them and their stakeholders, and position themselves at the leading edge of a reporting landscape set to evolve further in the years ahead.

In our experience, preparing high quality climate disclosures takes time, involves collaboration between a number of different internal stakeholders and relies on a wide-range of data sets. We would therefore recommend that businesses act now to ensure they are prepared for the new climate disclosure requirements.

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