LSE publishes new climate reporting guidance
LSE first out of the traps on TCFD-aligned guidance
In June 2021, the UN Sustainable Stock Exchanges Initiative ("UN SSE") launched its Model Guidance on Climate Disclosure, a template for stock exchanges to guide issuers in implementing the 2017 recommendations produced by the Taskforce on Climate-related Financial Disclosure ("TCFD"). The UN SSE drew upon the insight of the 100 experts from 55 organisations across 23 countries which make up its Climate Advisory Group and in his preface to the Model Guidance, Mark Carney expressed hope that its publication would serve as the first step that stock exchanges might take on the journey to a net zero future. London Stock Exchange plc (the "LSE") has now taken a next step, becoming the first exchange to publish TCFD-aligned guidance.
Provided for Main Market-listed and AIM companies as a guide to integrating climate reporting best practice and implementing the TCFD recommendations, the LSE's "Guide to Climate Reporting" becomes available as part of its newly launched Climate Transition Offering, which seeks to help issuers prepare for the transition to a low-carbon economy and produce effective climate reporting - it even comes with a bitesize training series on climate reporting which has been put together in partnership with the UN SSE. The LSE's Guide to Climate Reporting is tailored to the UK regulatory and policy environment and the LSE recommends its being read alongside another of its prior publications - Revealing the full picture: your guide to ESG reporting - and cross-references it on occasion.
The three-stage guide to climate reporting
The LSE has emphasised that its Guide to Climate Reporting should be read as a broad overview rather than a "deep technical document". It sets out a three stage, cyclical process which it believes can be undertaken by any company, regardless of its size or sector, to help them integrate and communicate client-related information that is consistent with the TCFD's recommendations. Those steps which can be taken are, to:
- Evaluate its current disclosures (and a checklist to help with that assessment is provided as Annex 1 to the new guidance);
- Begin to integrate climate-related considerations into its risk assessment and strategy development processes on a 'top down' basis through policies, processes and strategy; and
- Communicate the organisation's understanding through its disclosure of climate-related practices, strategy and objectives to investors and stakeholders.
Whilst naturally targeted at companies listed on the LSE's markets, all companies are advised to take the recommendations into account when assessing the usefulness and consistency of information communicated to investors and wider stakeholders. The guidance aims to help all companies make their way through the three-step cycle at a depth and detail that is appropriate to their particular phase of reporting practice evolution, even if they have limited reporting experience or resources.
Expanding climate governance tools for issuers
Additionally, the LSE has issued Climate Governance Scores for over 400 issuers as a private, educational resource for them to assess the quality of their carbon management practices. Other companies can use an online tool to self-calculate their score. Accessible via the Climate Transition Offering portal (see below), these tools aim to:
- Enable issuers to understand key climate metrics for investors;
- Identify areas for improvement (providing personalised recommendations); and
- Assess their performance against industry peers.