Updated guidance published on TCFD-aligned disclosure guidance for public sector annual reports

Published 20 July 2023

Last updated 25 July 2024 — See all updates

Task Force on Climate-related Financial Disclosure (TCFD) -aligned disclosure application guidance - Phase 1 and Phase 2

TCFD-aligned disclosure Application Guidance - Phase 1 and Phase 2

TCFD-aligned disclosure Exposure Draft - Phase 3

TCFD-aligned disclosure application guidance - Phase 1

This application guidance is for new climate-related financial disclosures, incorporating the TCFD recommendations into central government and public sector annual reports.

Effective Date

HM Treasury has set out a three-year phased implementation approach for central government. Phase 1 applies to 2023-24 annual reports and accounts, Phase 2 to 2023-24, and Phase 3 to 2024-25 (on a comply or explain basis). Other public sector bodies should follow the direction from their respective relevant authority^[1].

Scope

This application 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 to follow this guidance by their respective relevant authority or parent department. Other central government and public sector bodies may choose to voluntarily follow this guidance - in full or in part.

Phase 1

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

• TCFD Compliance Statement – summarising the extent to which the guidance has been complied with, the reasons for non-compliance, and providing an overview of plans for future reporting.
• TCFD's Governance recommended disclosures, including:

(a) describe the board's oversight of climate-related issues.

(b) describe management's role in assessing and managing climate-related issues.

• TCFD's Metrics and Targets recommended disclosure:

(b) disclose Scope 1, Scope 2, and, if appropriate, Scope 3 Greenhouse Gas (GHG) emissions, and the related risks -aligning with existing GHG emissions reporting methodologies where appropriate^[2].

Phase 2

This application guidance^[3] is additive, with Phase 2 expanding on the existing reporting requirements for Phase 1. Phase 2 requires in-scope reporting entities to include the following in their 2024-25 annual reports (on a comply or explain basis):

• TCFD's Risk Management recommended disclosures:

(a) describe the organisation's processes for identifying and assessingclimate-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.

Plus, a description of the risk, in line with existing performance reporting requirements. Where climate is not designated a principal risk, reporting entities must articulate their rationale.

Where climate is a principal risk:

• TCFD's Metrics and Targets recommended disclosures:

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

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

Phase 3

Phase 3 expands on the existing reporting requirements for Phase 1 and Phase 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:

• TCFD's Strategy recommended disclosures:

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

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

(c) describe the resilience of the organisation's strategy, taking into consideration different climate-related scenarios, including a 2°C and a 4°C scenario.

The exposure drafts for Phase 3 has been published with the consultation open until Thursday 19 September 2024. Please refer to TCFD-aligned disclosure Exposure Draft for Phase 3) .

^{[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 (in addition to business travel) are being introduced in this application guidance. Central government bodies outside of the scope of the Greening Government Commitments (GGCs), and wider public sector bodies may implement this requirement in Phase 2 in line with the application guidance (without the need to explain non-compliance).}

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