The Financial Reporting Council (FRC) recently published its 2023 Statement of Intent, setting out its plans for tackling some of the challenges with ESG reporting. These include:

Guidance

Producing updated guidance on:

• ESG data – how to communicate ESG data and how investors, regulators and other stakeholders consume the data to meet their needs.
• Climate-related risks for FRS 102 preparers of financial statements – to assist with new reporting requirements.
• Guidance on the strategic report – to reflect changes in requirements such as new narrative reporting and, where necessary, any sustainability reporting arising from developments in the Sustainability Disclosure Requirements.

Reviews

The FRC will also be reviewing:

• Materiality in reporting – how do companies develop, assess and use materiality? Relevant, useful information instead of reports of increasing length is important. Materiality can ensure this and the FRC wants to investigate where improvements can be made.
• Audit quality – evaluating audits and audit assurance work on climate-related risks including the linkage between the audited financial statements and climate-related disclosures elsewhere in the annual report.
• Corporate governance reporting – a continuing review of corporate governance reporting and a revision of the UK Corporate Governance Code is expected in 2023.
• Investors’ management activities – as part of assessing applicants as signatories to the Code, reviewing how investors integrate material ESG issues into their investment management activities.

Reports

The FRC also intends to build on the thematic reviews of Task Force on Climate-Related Financial Disclosures and climate reporting in the financial statements of UK listed companies by publishing a further report with metrics and targets for four key industries. This will be a thematic report and forms part of the FRC's response to the work of the Transition Plan Taskforce on climate transition plans.

Comment

Much of the focus when it comes to ESG reporting has been on stakeholder information – improving the quality and consistency of ESG related information to help inform investment decisions. This of course benefits reporting companies who take ESG seriously as, by increasing transparency and consistency, their ESG credentials will shine through.

The plans for 2023 seem to focus quite heavily on assisting companies when producing their reports – there is a lot of guidance expected, as well as the review on materiality which could help identify efficiencies and enhancements for companies.

You may also be interested in our comment on the Disclosure Framework and Implementation Guidance by the Transition Plan Taskforce here.