The Financial Markets Authority (FMA) has published a report following its review of climate statements prepared by 70 climate reporting entities (CREs) in their first year of mandatory climate reporting. The report acknowledges the effort that CREs put in to preparing their first mandatory statements but identified several areas where improvement was required across the board.

This report is crucial for those involved in preparing climate statements for year two. It provides valuable insights on the following key themes:

• Striking the right balance in the amount of information disclosed
• Presenting disclosures fairly
• Disclosing all material information, including methods, assumptions, and data uncertainty
• Describing the processes undertaken, including their frequency when relevant
• Explaining how climate-related issues are integrated with other organisational activities
• Understanding and applying the concept of “current climate-related impact”
• Disclosing material information regarding climate-related risks and opportunities
• Describing all material information for greenhouse gas (GHG) emissions targets
• Focusing on enhancing scenario analysis

The FMA also outlined the additional focus areas it would incorporate into its review of second year climate statements, which include:

• Compliance with mandatory assurance on GHG emissions disclosures
• Efforts to comply with disclosures related to financial impacts and transition planning
• Follow-through on commitments made in the first year
• Consistency with prior disclosures, with clear explanations for any material differences

The FMA has said it will continue its “educative and constructive” approach to monitoring and enforcing the regime as set out in its earlier published Monitoring Plan. However, it expects CREs to make improvements based on the insights in its report.

Many of the FMA’s key themes align with insights shared in our recent series on climate-related reporting, which is available here.

We recommend that entities involved in climate-related reporting assess their first-year climate statements against the FMA report and our insights. This will help identify priority areas to focus on for the next round of disclosures. Please get in touch with our experts to discuss how we can assist with your year 2 statements.

Special thanks to Isabel Van Tuinen for her assistance in writing this article.