British watchdog calls for global climate disclosures rules

By Huw Jones

LONDON (Reuters) - Britain's accounting and corporate governance regulator called on Tuesday for global rules to improve how companies inform investors about how their activities relate to climate change and cutting carbon emissions.

Climate change can reduce the value of assets or subject companies to costs from weather-related events like flooding, but there are no consistent, global requirements to help investors navigate company balance sheets.

The Financial Reporting Council (FRC) published a review of how companies and their auditors consider climate-change in their activities.

While minimum legal reporting requirements are often met, investors are calling for additional disclosure to inform their decision making, it found.

"To move forward, a reporting framework is needed," the FRC said in a statement, adding that investors support the use of the voluntary disclosures recommended by the Task Force on Climate-related Financial Disclosures (TCFD), a global body.

The FRC said TCFD was an "interim step" ahead of global standards. A separate regulatory review last month said that too few companies specify the financial hit from climate change when applying TCFD.

The Bank of England has also said that more granular disclosure requirements were needed.

British Finance Minister Rishi Sunak said on Monday that Britain will make TCFD disclosures mandatory by 2025, going beyond the current "comply or explain" approach.

The FRC said it was the company board's responsibility to consider climate-related issues, but there is "little evidence" that business models and company strategy are influenced by integrating climate considerations into governance.

"Auditors need to test and, where necessary, challenge the board and management’s assessment of the financial statement implications of climate change," it said.

(Reporting by Huw Jones; Editing by Alexander Smith)