Audit: Climate Change

Department for Business, Energy and Industrial Strategy written question – answered on 7th January 2019.

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Photo of Mary Creagh Mary Creagh Chair, Environmental Audit Committee

To ask the Secretary of State for Business, Energy and Industrial Strategy, what steps he is taking to ensure that the audit industry supports the assessment and disclosure of climate-related financial risk.

Photo of Kelly Tolhurst Kelly Tolhurst Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

The Companies Act 2006 requires companies to include a description of their principal risks, and how they are managed, within their strategic reports. Such risks may include those related to climate change.

The Government has endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD encourages companies to consider climate-related issues in relation to their business and recommends that climate-related financial risks are disclosed within annual reports. The Task Force has also made recommendations to promote more informed understanding of such issues and opportunities by both the producers of such disclosures and by the recipients of the reports, namely investors.

Under the existing regulatory framework, the auditor must state whether the information given in the strategic report and the directors’ report is consistent with the financial statements; whether such reports have been prepared in accordance with the law; and whether, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, any material misstatements in the reports have been identified.

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