Press release: 4 February 2021

Majority of largest UK companies ‘woefully’ failing on climate change reporting

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.

Lawyers from environmental charity ClientEarth conducted a comprehensive review which revealed a number of key findings, including that more than 90% of the UK’s 250 largest listed companies make no reference to climate-related factors in their financial accounts.

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.

ClientEarth Lawyer Daniel Wiseman said:

“It’s crystal clear that urgent action is needed to address the existing accountability gap for climate-related corporate reporting – continued failures to disclose material information to the market must have consequences.

“A handful of firms are doing the right thing, but the vast majority still have their head in the sand.

“Current disclosure practices indicate that many firms appear to be either ignoring or denying the systemic impact climate change and the zero carbon transition will have on their business. Regulators, auditors and investors are all letting them get away with it.”

The Government and regulators’ recent announcements to upgrade climate disclosure laws are welcome, but to meet investor needs, firms should be required to disclose a transition strategy aligned with the Paris Agreement goals, and existing accountability mechanisms must be improved and actively used.

Around half of the 250 companies reviewed now refer to a ‘net-zero’ or ‘Paris Agreement-aligned’ goal in their annual report. This is a step in the right direction. However, in the majority of cases, material detail is lacking on strategy, business model and accounting impacts, interim targets and key assumptions.

This deepens the concerning risk of greenwash that the Government and financial regulators must address. The report calls for regulatory enforcement teams to investigate the adequacy of a company’s climate reporting, and for investors to be provided with additional engagement tools through an annual shareholder vote on transition plans.

“The Financial Reporting Council (FRC) and Financial Conduct Authority (FCA) already have powers to sanction companies and auditors, and require new statements. Strong enforcement action is needed when companies, their directors and auditors omit material climate change-related information in their annual reports.”

Investors also have a duty to drive accountability, in order to meet their own legal obligations to manage climate change-related risk through their investment decision-making and stewardship.

Wiseman said: “Investors have been complaining that they can’t take action until companies provide better disclosures – but they are far from helpless.

“If investors are serious about their climate credentials, they need to use their legal powers to vote out directors and auditors where climate change risks are not being properly managed and reported.

“The UK now has a legally binding obligation to reach net zero greenhouse gas emissions by 2050. It must be a basic expectation that all companies have a strategy to transition their business to meet this target and provide fair and balanced disclosures to their investors about how they plan to do so.”


Notes to editors:
  • The full report can be downloaded here.
  • Daniel Wiseman is an Australian-qualified lawyer.

About ClientEarth

ClientEarth is a charity that uses the power of the law to protect people and the planet. We are international lawyers finding practical solutions for the world’s biggest environmental challenges. We are fighting climate change, protecting oceans and wildlife, making forest governance stronger, greening energy, making business more responsible and pushing for government transparency. We believe the law is a tool for positive change. From our offices in London, Brussels, Warsaw, Berlin and Beijing, we work on laws throughout their lifetime, from the earliest stages to implementation. And when those laws are broken, we go to court to enforce them.