Mandatory climate-related financial disclosures by publicly quoted companies, large private companies
and LLPs
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(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/LLP’s business model and strategy;
Guidance related to disclosures (d) and (e) is presented together, as impacts should be
considered in respect of each of the risks identified, together with mitigating actions. This
should provide a clearer narrative for the reader of the accounts.
Risks (d) (i) & (ii):
Climate-related risks and opportunities may arise in the short term, medium term, or over a
period of time which may be outside the company or LLP’s usual planning cycle. It is essential
that in identifying climate-related risks and opportunities a business should consider all
relevant time horizons, not just those that are usually considered for budgetary, strategy or
planning purposes.
The disclosure of the climate-related risks and opportunities should enable a user of the
accounts to understand the risk or opportunity posed by climate change and to understand the
potential effect of that risk or opportunity on the business. The disclosures should also enable
a user of the accounts to understand the mitigations, where appropriate, that a business has
already put in place and the mitigating actions that it is planning to take. It is also necessary to
provide information which enables a user of the accounts to understand the likely time periods
over which the risk or opportunity is expected to crystallise.
The risks and opportunities should be categorised, wherever possible, into short term, medium
term and long term and the company or LLP should explain how it has determined the time
periods that it is treating as short, medium and long term. The assessment of the appropriate
time periods for short, medium and long term should take into account the nature of the
company or LLP’s business and operations and may include factors such as the budgetary
cycle, asset lives, length of financing arrangements and the periods over which climate risks
and opportunities are expected to affect the business.
Where material to the business, it may be relevant to distinguish between “physical” climate
change risks, such as increased frequency of extreme weather events or sustained impacts
from temperature rises, for example, to supply and distribution arrangements, and “transition”
risks, that is, risks associated with transition to a net zero economy, which might prompt review
or adaptation of business models.
Physical risks:
Companies and LLPs should consider both acute physical risks (e.g., higher frequency or
severity of weather-related events such as winter storms, surge floods, hail and wildfires) and
chronic physical risks (e.g., longer-term changes to weather patterns and associated sea-level
rises, hot or cold waves and droughts). In determining the level of detail that is necessary to
meet this requirement, a company or LLP should consider the range of geographical locations
in which it operates, the extent to which those geographical locations may be subject to both