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Companies (Strategic Report) (Climate Related Financial Disclosure) Regulations

On 6 April 2022, the Companies Act will be amended by statutory instrument to include new sections incorporating the Companies (Strategic Report) (Climate Related Financial Disclosure) Regulations. 

The CRF Regulations will have the effect of making it compulsory for the UK’s largest registered companies and financial institutions including banks and insurers as well as private companies with over 500 employees and £500 million turnover, to disclose climate-related financial information in relation to climate risks as well as climate opportunities.

The CRF Regulations will broadly follow the recommendations from the Task Force on Climate Related Financial Disclosure (TCFD). which essentially focuses on 4 main pillars -

  • governance,
  • strategy,
  • risk management, and
  • metrics

Background and Aims

The aims of the TCFD is to create consistent information for climate related risks and opportunities for investors and developed a reporting framework based on a set of consistent disclosure recommendations for use by companies as a means of providing transparency on its climate related risk exposure to investors lenders and insurance underwriters. 

The TCFD has been in existence since 2015 having been created by the Financial Stability Board and Mark Carney United Nations Special Envoy on Climate Action and Finance in response to the climate emergency and its impact upon the global financial sector.  It is estimated that the global financial sector has suffered some $5 trillion losses as a result of the impacts of climate change and with the need for trillions of dollars to build climate-friendly and climate resilient infrastructure, it was felt critical that investors had the necessary information to know which companies to invest in and which to avoid.

The UK will become one of the first G20 countries to make compliance with the TCFD mandatory.  The government is hoping that the CRF Regulations will  “increase the quality and quantity of climate related reporting across the UK business community and will ensure businesses consider the risks and opportunities the face as a result of climate change and encourage them to set emission reduction plans and sustainability credentials.  The CRF Regulations are also part of the government’s efforts to make climate related financial disclosure mandatory across the economy by 2025.

Obligations on Business

The obligations on businesses will be as follows:-

a. a description of the company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities;

b. a description of how the company identifies, assesses, and manages climate-related risks and opportunities;

c. a description of how processes for identifying, assessing, and managing climate-related risks are integrated into the company’s overall risk management process;

d.  a description of—

i. the principal climate-related risks and opportunities arising in connection with the company’s operations, and

ii. the time periods by reference to which those risks and opportunities are assessed;

e. a description of the actual and potential impacts of the principal climate-related risks and opportunities on the company’s business model and strategy;

f. an analysis of the resilience of the company’s business model and strategy, taking into consideration different climate-related scenarios;

g. description of the targets used by the company to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and

h. a description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based.

There will also be a provision for directors of a company to omit climate related financial disclosure either completely or in part if they:-

  • “reasonably believe that, having regard to the nature of the company’s business, and the manner in which it is carried on, the whole or a part of a climate-related financial disclosure required by subsection (2A)(e), (f), (g) or (h) is not necessary for an understanding of the company’s business..”

However if a business intends to rely on this provision the regulations stipulate it must provide reasons as to why the information has been omitted.


It will be a criminal offence to fail comply with the CRF regulations with the penalty being an unlimited fine.  This also applies to every person who was a director of the company immediately before the end of the period for filing accounts and reports for the financial year in question AND who failed to take all reasonable steps for securing compliance with the requirements therefore putting directors at risk of prosecution as well as the company.


Whilst the CRF regulations clearly give rise to legal risks ,if the regulations are implemented properly by businesses then it could be argued that the regulations have the effect of significantly reducing the risk by providing protection from climate litigation risk.

The inclusion in the Regulations to allow a business not to disclose climate related information as referenced above will need to be monitored to ensure that it does not have the effect of undermining the purpose of the regulations.  The first monitoring of the Regulations is to be undertaken in 2027.

There is also the risk that there will be ‘greenwashing’ by some business but the government has said in response to criticism of the potential for greenwashing is that a science based ‘gold standard’ for transitions plans will be drawn up by a new Transition Plan Taskforce which will be composed of industry and academic leaders, regulators as well as civil society groups.

Evidence suggests that large number of companies and institutions are aware of the impending CRF Regulations and if not yet fully prepared for the implementation of the Regulations are working towards it.