The Financial Reporting Council (FRC), the UK regulator for auditors, accountants and actuaries, announced today the release of its “ESG Statement of Intent,” outlining areas it has identified as key challenges with ESG reporting, and its actions to address these areas, including a focus on how ESG data is used and communicated and how companies assess which issues are material for stakeholders.

The announcement follows the release of the FRC’s initial ESG Statement of Intent in 2021, which kicked off several ESG-focused initiatives to address underlying issues with the production, audit and assurance, distribution, consumption, supervision and regulation of ESG information, as well as the recent establishment of the FRC ESG Group, a cross-FRC advisory body focused on responding to ESG challenges and to respond to stakeholder needs.

Mark Babington, Executive Director of Regulatory Standards at the FRC, said:

“I am delighted that the FRC is today updating its very well received ESG Statement of Intent. Since we issued it in 2021, the FRC is proud to have produced a wide range of helpful tools, information and guidance that reflects the breadth of the FRC’s remit as well as the fast-evolving landscape of ESG and sustainability reporting globally.”

The statement outlines a broad range of areas that the FRC will address in 2023, including developing guidance and best practice on the distribution and consumption of ESG data, and examining companies’ materiality processes to consider how enhancements could be made to ensure that companies provide stakeholders with relevant and decision-useful information.

The FRC said that it will also update its guidance on Climate-related risks for financial reporting preparers, introduce requirements for actuaries to take account of climate and other ESG related risks in their work, and revise the corporate governance code to recognize growing importance of ESG reporting.

On the audit front, the FRC said that its audit quality inspections program will pay particular attention to work on climate-related risks, including the linkage between audited financial statements and climate related disclosures in the annual report.

Babington added:

“Improving transparency on climate and wider ESG risks and opportunities, and related governance activities and behaviours, is a key priority for our work, benefitting all those stakeholders who demand decision useful reporting which underpins effective decision making in capital markets.”