Financial Reporting Council’s (FRC) Statement of Intent on Environmental and Social Governance (ESG)

The FRC originally published its’ statement of intent for ESG in 2021 and has now updated this for activity over the last 18 months and for the year ahead.

The FRC continues to guide businesses to provide consistent, comparable, and decision-useful information for their stakeholders through the financial statements and is prioritising open and honest disclosure of climate and wider ESG risks and opportunities, and related governance activities and behaviours.

The FRC’s ESG strategy will be ever evolving as the regulatory and reporting environment changes resulting in a need for agility and timely response to provide quality guidance to enable enhanced quality of reporting and assurance.

Some of the FRC’s key focus points are as follows:

1. developing guidance and best practice on the distribution and consumption of ESG data, ensuring communication to stakeholders meets their ESG data needs
2. helping preparers of FRS 102 financial statements to meet the demand from stakeholders to understand how ESG affects companies’ financial position and performance, and the associated risks that they face.
3. providing further comprehensive updates to the Guidance on the Strategic Report to capture changes in ESG requirements.
4. publishing new thematic reports as part of a response to the work of the Transition Plan Taskforce (TPT), launched by HM Treasury in April 2022, to develop a common framework for developing and reporting climate transition plans.
5. continue to review corporate governance reporting by undertaking a revision of the UK Corporate Governance Code, in a way that recognises the growing importance of ESG reporting
6. focusing audit quality inspections towards the auditor’s work on climate-related risks, including the linkage between the audited financial statements and climate-related disclosures elsewhere in the Annual Report.
7. to consider identifying Public Interest Entities with significant environmental risk and monitor whether the auditor has completed appropriate and relevant training.
8. continue to engage both in the UK and internationally to ensure that work and the development of policy meets the needs of stakeholders as they navigate ESG and Climate reporting required by global capital markets.