A UK company must include climate related financial disclosures in its strategic report if it has more than 500 employees and is either a traded company, a bank, an insurer, a company carrying on insurance market activity, an AIM company, or a company (or group) with turnover above £500 million. The requirement comes from sections 414CA and 414CB of the Companies Act 2006 and has applied to financial years starting on or after 6 April 2022. Small and medium sized companies are never in scope.

Which companies are in scope?

Section 414CA requires a non financial and sustainability information statement in the strategic report of a company that, at any time in the financial year, was:

  • a traded company;
  • a banking company;
  • an authorised insurance company;
  • a company carrying on insurance market activity; or
  • a company with securities admitted to trading on AIM.

It also applies to a high turnover company, meaning one whose turnover for the year was more than £500 million or, for a parent, whose group had aggregate turnover of more than £500 million net.

Two filters then apply to every category. Section 414CA(3) disapplies the requirement if the company is subject to the small companies regime or qualifies as medium sized. Section 414CA(4) disapplies it unless the company, or for a parent the group it heads, had more than 500 employees. Under section 414CB(A1) the statement must contain the company’s climate related financial disclosures.

The 2022 regulations on strategic report climate disclosure (SI 2022/31) inserted the climate requirements and apply to financial years commencing on or after 6 April 2022. A company outside the scope may still include a statement voluntarily under section 414CA(10).

How are turnover and employees counted for a group?

For a parent, section 414CA(2A) and (2C) look at the group’s aggregate turnover, net of intra group transactions in the same sense as the small company test in section 383(6). If the financial year is not twelve months, the £500 million figure is adjusted proportionately. Employees are the monthly average number employed under contracts of service, aggregated across the group under section 414CA(5) and (6).

Government guidance adds that companies are expected to report at group level, and that the top UK parent of an in scope group should report on the global operations of the group, whether activities are carried on through UK or overseas subsidiaries. Where a parent does not prepare consolidated accounts, the scope tests are applied to the aggregated turnover and employee figures of the group it heads, and the disclosures relate to the parent, including how climate risks may affect the value of its investments in subsidiaries. Whether consolidated accounts are needed at all is explained in when a parent must prepare group accounts.

Can a subsidiary rely on its parent’s report?

Section 414CA(7) and (8) exempt a subsidiary that is included in a group strategic report of a parent undertaking, where that report covers the subsidiary and its own subsidiaries, is prepared for a year ending at the same time as or before the subsidiary’s year end, and contains a group non financial and sustainability information statement for all the undertakings in the consolidation.

The government guidance reads this as an exemption that needs a UK parent. Where a UK company has an overseas parent that reports on a consolidated basis, the guidance says the exemption does not apply, so a large UK subsidiary of a foreign group that meets the tests on its own figures reports in its own strategic report.

Illustration only. A privately owned UK group has aggregate net turnover of £620 million and 1,400 employees on average. The UK parent includes climate disclosures in its group strategic report. One UK subsidiary has turnover of £510 million and 900 employees, which would put it in scope on its own, but it is covered by the parent’s compliant group report with the same year end, so it is exempt. If the same subsidiary were owned by a US parent instead, it would need to make its own disclosures.

What do the eight disclosures require?

Section 414CB(2A) lists the climate related financial disclosures:

  1. Governance: the arrangements for assessing and managing climate related risks and opportunities.
  2. Identification and management: how those risks and opportunities are identified, assessed and managed.
  3. Integration: how the processes for climate risk feed into the company’s overall risk management.
  4. Principal risks and opportunities: those arising in connection with the company’s operations, and the time periods used to assess them.
  5. Impact: the actual and potential impact of those principal risks and opportunities on the business model and strategy.
  6. Resilience: an analysis of the resilience of the business model and strategy, taking into account different climate related scenarios.
  7. Targets: the targets used to manage climate risks and realise opportunities, and performance against them.
  8. KPIs: the key performance indicators used to assess progress against those targets, and the calculations behind them.

The first four are always required. Under section 414CB(4A) and (4B), the directors may omit all or part of disclosures 5 to 8 if they reasonably believe, given the nature of the business and how it is carried on, that it is not necessary for an understanding of the business, but the statement must then give a clear and reasoned explanation of that belief.

Only the traded, banking, insurance and insurance market categories must also report on environmental, employee, social, human rights and anti corruption and bribery issues under section 414CB(1) and (2). An AIM company or a high turnover private company that is in scope only because of those categories gives the climate disclosures but not that wider content.

How much detail is expected?

The government’s non binding guidance, published in February 2022, explains that the requirements are based on the recommendations of the TCFD, the international task force on climate related financial disclosures, but do not mirror them directly. On the resilience disclosure, it says scenario analysis should be at least qualitative, using narrative to explore the implications of different possible climate impacts, and that quantitative scenario analysis is not necessary to meet the regulations. It suggests scenario analysis should normally be renewed at least every three years, or sooner if assumptions change significantly.

Companies with energy and emissions data from streamlined energy and carbon reporting often use it in the targets and KPI disclosures, but SECR is a separate requirement in the directors’ report with its own scope.

What about LLPs and listed companies?

Separate 2022 regulations for LLPs (SI 2022/46) apply equivalent rules to LLPs. Traded or banking LLPs with more than 500 employees include the disclosures in their strategic report. Other large LLPs, defined as those with more than 500 employees and turnover of more than £500 million, include them in their energy and carbon report.

Listed companies are also subject to FCA rules on climate reporting, which are separate from the Companies Act. The government guidance says a company subject to both that discloses consistently with all the TCFD recommendations is normally likely to meet the Act’s requirements as well. Listed company reporting is moving to UK sustainability reporting standards, covered in UK sustainability reporting standards.

Who checks the disclosures, and what happens if they are wrong?

The disclosures form part of the strategic report, which the board approves; the wider rules are explained in the strategic report. The government guidance says the Financial Reporting Council monitors strategic reports and can ultimately apply to court for a declaration that a report does not comply, which can lead to an order for revised accounts and reports. The auditor’s normal responsibilities for the strategic report also apply, so uncorrected material misstatements in the climate disclosures should be recorded in the auditor’s report. Directors who find their own report was defective can correct it voluntarily; see revised and defective accounts.

The 2022 Regulations require the government to publish its first review of them before 6 April 2027, and the Modernising corporate reporting consultation, open until 30 November 2026, includes proposals on non financial reporting. The current requirements continue to apply until any change is made.

What mistakes come up most often?

  • Testing only the company’s own turnover and employees when it is a parent, rather than the group aggregates.
  • Assuming that a UK subsidiary of an overseas group can rely on its parent’s global report.
  • Dropping disclosures 5 to 8 without a clear and reasoned explanation.
  • Treating SECR figures as if they were the climate disclosures, or the reverse.
  • Describing climate risks in general terms without the time periods over which they are assessed.
  • For AIM and high turnover companies, padding the statement with the wider non financial content they are not required to give, while thinning out the climate content they must give.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.