Accountability Emergency: A review of UK-listed companies’ climate change-related reporting (2019-20)

The overwhelming majority of top listed companies in the UK are woefully inadequate at disclosing in corporate reporting how climate change will affect their business – with many potentially breaching the law – a new study shows.

Existing UK laws require all large companies to disclose material information about their climate change-related risks and impacts.

Clear investor demand means that companies must provide a detailed picture of how their business is positioned as the global economy shifts towards ‘net-zero’ greenhouse gas emissions, including how it will impact their strategy, long term viability and balance sheet. Company auditors must also sign off on their work.

To see how firms and auditors meet this demand, lawyers reviewed the entire FTSE 100 and the largest 150 companies on the FTSE 250, studied each company’s most recent annual report, and developed a quantitative assessment of how company disclosures match up against existing disclosure requirements.

Key findings include:

• Financial accounts: More than 90% of companies’ financial accounts and associated audit reports make no reference to climate change-related factors;
• Risks and impacts: 40% of companies do not refer to climate change-related risk in the ‘principal risks and uncertainties’ section of their annual report;
• Business model impacts: Fewer than 25% of companies clearly reference the impact climate change will have on their business model;
• Greenhouse gas emissions: 15% of companies still fail to disclose their Scope 1 and 2 greenhouse gas emissions; and
• Paris-alignment/net-zero targets: Around 50% of companies mention some form of ‘Paris-alignment’ or ‘net-zero’ target, but many provide limited details – raising concerns of greenwash.