Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner. Facebook Messenger An icon of the facebook messenger app logo. Facebook An icon of a facebook f logo. Facebook Messenger An icon of the Twitter app logo. LinkedIn An icon of the LinkedIn logo. WhatsApp Messenger An icon of the Whatsapp messenger app logo. Email An icon of an mail envelope. Copy link A decentered black square over a white square.

UK accounting watchdog updates ESG standards

© Shutterstock / Vintage TonePost Thumbnail

The Financial Reporting Council (FRC) has released an update providing details of its progress and its plans for 2023, which include developing standards and best practices on data, materiality, corporate governance and investor expectations on ESG.

  • The FRC in the UK has provided an update to its first ‘Statement of Intent’ on ESG reporting.
  • It plans on focusing on improving the efficacy of ESG data, looking at materiality disclosure requirements, establishing an ESG corporate governance code and ways to better inform investors on ESG reporting. 
  • The accounting watchdog will also tighten requirements when it comes to evaluating climate risks in the accounts of various types of organisations. 

The role of the FRC in the UK is to improve transparency and integrity in business reporting for investors and the public, who rely on company reports and audited data to make informed financial and risk management decisions.

It regulates auditors, accountants and actuaries, and sets corporate governance and stewardship codes in the UK. The FRC is structured as an independent regulator and a government body, which is governed by a board, the chair and members appointed by the Department of Business, Energy and Industrial Strategy.

What did the FRC’s first ‘Statement of Intent’ establish?

The FRC’s first “Statement of Intent”, published in July 2021, recognised the need to build a reporting and standards framework aligning with changes in regulations around ESG disclosures. It also envisaged the need to incorporate a double materiality lens, looking at environmental challenges faced by businesses and their impact on the environment and society. 

Building on its work with stakeholders and market participants, the FRC identified six areas in which it faced challenges in constructing a framework: production, audit and assurance, distribution, consumption, supervision and regulation.

The document established the approach to dealing with each of these challenges. This entailed coordinating with existing and established frameworks, such as the Taskforce on Financial Disclosures, connecting with regulators in other jurisdictions to develop solutions, and contributing to best practices and thought leadership on ESG reporting.

What is in the updated Statement?

In its update published in January 2023, the FRC identified ongoing challenges in building an ESG reporting framework. In the future, it expects to focus on the responsibilities of auditors in relation to climate risks. In particular, the auditors will be required to makeconnections between climate data in audited financial statements and in figures contained in other parts of the annual report being compiled. 

The Statement contained plans for Public Interest Entities (PIEs), a term comprising companies listed on a stock exchange, banks and building societies, insurance firms, and large unlisted companies with over 750 employees and over £750 million in annual turnover. The FRC will identify PIEs that are heavily exposed to climate-related risks and whether their auditors are adequately trained.

What’s next for the FRC’s ESG reporting framework?

A key development in 2022 was guidance issued by the FRC on aligning climate-related financial risks with the requirements of TCFD and the Streamlined Energy and Carbon Reporting (SECR) regulation. In its January 2023 update, the FRC also listed areas that it plans to focus on in 2023. 

These include ESG-based projects and themes it will focus on during the year, including finding and using ESG data effectively, materiality disclosure considerations, support for preparers of principal financial statements, establishing requirements for an ESG corporate governance code, and linking ESG reporting to investor requirements.

Mark Babington, executive director of regulatory standards at the FRC, said: “Today’s Statement of Intent highlights the ongoing challenges and opportunities of producing ESG reporting and disclosures and where the FRC’s focus in 2023 will continue to provide guidance and examples of best practice, both in the UK and internationally.”

He added: “Improving transparency on climate and wider ESG risks and opportunities, and related governance activities and behaviours, is a key priority for our work, benefitting all those stakeholders who demand decision useful reporting which underpins effective decision making in capital markets.”

More from SG Voice

Latest Posts