Category: Sustainability and ESG

Climate-Related Disclosure

Also known as: Climate Risk Disclosure, Climate-Related Financial Disclosure

Simply put

Climate-related disclosure is the process by which companies publicly report the risks and opportunities that climate change poses to their operations and financial position. Depending on the applicable regime, it may cover how climate factors could affect a company's business and how the company manages those factors. Whether such disclosure is legally required, and in what form, varies significantly by jurisdiction, sector, and entity type.

Formal definition

Climate-related disclosure refers to an entity's reporting of information about its climate-related risks and opportunities, typically to inform investors and other users of general-purpose financial reports. Under certain frameworks, such as IFRS S2, the objective is to require disclosure of climate-related risks and opportunities that is useful to users of general-purpose financial reports; other regimes have taken varying approaches. The status of such disclosure ranges from voluntary standards to binding requirements and remains in flux: for example, the U.S. Securities and Exchange Commission adopted final rules in 2024 requiring information about a registrant's climate-related risks reasonably likely to have a material impact, and subsequently proposed rescinding those rules in their entirety in 2026, while other governments have pursued their own mandates. Practitioners should confirm the current legal status, scope, and materiality thresholds applicable to a given entity, as these depend on facts, jurisdiction, and the specific framework in force. This entry is educational and not legal, audit, or compliance advice.

Why it matters

Climate-related disclosure has become a focal point where investor demand for decision-useful information, evolving regulatory expectations, and corporate reporting practices intersect. For users of general-purpose financial reports, information about how climate factors could affect a company's business and financial position can inform capital allocation and stewardship decisions. For the reporting entity, the discipline surrounding disclosure, identifying climate-related risks and opportunities, assessing potential impacts, and describing how they are managed, engages governance oversight, risk management processes, and reporting controls.

The status of climate-related disclosure remains in significant flux, and this uncertainty is itself a governance concern. The regulatory landscape can shift: the U.S. Securities and Exchange Commission adopted final rules in 2024 requiring information about a registrant's climate-related risks reasonably likely to have a material impact, and subsequently proposed rescinding those rules in their entirety in 2026 on the basis that they exceed the scope of the agency's authority. Meanwhile, other frameworks and jurisdictions have pursued their own approaches, and standards such as IFRS S2 set out disclosure objectives that certain entities may apply on a voluntary or mandated basis depending on local adoption.

Because requirements vary by jurisdiction, sector, and entity type, and because the applicable regime may be voluntary standard, proposed rule, or binding law, boards and management cannot assume that a single global mandate governs their obligations. Getting the analysis wrong in either direction carries consequences: over-disclosure relative to what is required may create legal or competitive exposure, while under-disclosure relative to an applicable mandate may create compliance and enforcement risk. Practitioners should confirm the current legal status, scope, and materiality thresholds applicable to their specific entity rather than relying on general expectations.

Who it's relevant to

Boards and Relevant Committees

Directors typically hold oversight responsibility for how the entity approaches material climate-related matters and for the adequacy of the disclosure process, without taking on the operational task of preparing the disclosures. Because the applicable regime may be a voluntary standard, a proposed rule, or a binding requirement, boards should seek clarity on which regime governs their entity and on whether disclosure obligations have changed.

General Counsel and Compliance Officers

Legal and compliance functions are generally concerned with confirming the current legal status, scope, and materiality thresholds applicable to the entity, particularly given that mandates can be adopted, amended, or proposed for rescission, as the shifting SEC rulemaking illustrates. They typically assess exposure arising from both over-disclosure and under-disclosure relative to what a specific jurisdiction requires.

Chief Risk Officers and Risk Functions

Risk professionals typically support the identification and assessment of climate-related risks and opportunities that could affect the business and its financial position, feeding that analysis into the information that management discloses. This work sits within the entity's broader risk management processes rather than being a standalone reporting exercise.

Internal Auditors and Assurance Providers

Where an applicable regime or the entity's governance calls for it, assurance functions may evaluate the design and operating effectiveness of controls over climate-related reporting. Their role generally focuses on the reliability of the disclosure process rather than on setting the entity's climate strategy or determining what must be disclosed.

Finance and Reporting Teams

Preparers of general-purpose financial reports are typically responsible for producing climate-related disclosures in accordance with the framework in force, applying the relevant objectives, such as those set out in IFRS S2 where adopted, and the applicable materiality thresholds. They generally rely on established reporting controls to produce reliable information for users.

Inside Climate-Related Disclosure

Governance Disclosures

Information about the board and management processes used to oversee and manage climate-related risks and opportunities, including which committee or role holds accountability. Under several disclosure frameworks, this is typically the first pillar of reporting.

Strategy Disclosures

Explanation of the actual and potential effects of climate-related risks and opportunities on the entity's business model, strategy, and financial planning, often including consideration of different time horizons and, under certain frameworks, scenario analysis.

Risk Management Disclosures

Description of the processes used to identify, assess, prioritize, and monitor climate-related risks, and how those processes are integrated into the entity's broader enterprise risk management. This is a disclosure of process ownership that typically sits with management, distinct from board oversight.

Metrics and Targets

Quantitative and qualitative measures used to assess and manage relevant climate-related risks and opportunities, which may include greenhouse gas emissions data and any targets set. The specific metrics required vary by framework, jurisdiction, sector, and entity type.

Transition and Physical Risk Categories

A common conceptual split between transition risks (arising from the shift to a lower-carbon economy, such as policy, legal, technology, and market changes) and physical risks (acute and chronic effects of climate change). Frameworks generally treat these as distinct risk types requiring separate consideration.

Basis of Preparation and Assumptions

Disclosure of the methodologies, scope boundaries, estimation techniques, and key assumptions underlying reported information, which supports comparability and allows users to assess reliability.

Common questions

Answers to the questions practitioners most commonly ask about Climate-Related Disclosure.

Is climate-related disclosure a single global mandate that applies to every company the same way?

No. There is no single universal mandate. Whether climate-related disclosure is legally required, and in what form, depends on the jurisdiction, the sector, the entity type, and often the size or listing status of the organization. In some jurisdictions certain disclosures are binding requirements under securities law or listing rules; in others they remain voluntary or are driven by non-binding frameworks and investor expectations. Some regimes are being phased in over time or apply only to specified categories of entity. Organizations should determine which specific obligations, if any, apply to their particular circumstances rather than assume a uniform standard.

Are frameworks like the TCFD recommendations or ISSB standards mandatory in themselves?

Not inherently. Frameworks and standards are typically developed as voluntary reference points or reporting architectures. They generally acquire binding force only where a legislature, securities regulator, or listing authority formally adopts or incorporates them into law, regulation, or listing rules within a given jurisdiction. As a result, the same framework may be a legal requirement in one jurisdiction, a comply-or-explain expectation in another, and purely voluntary elsewhere. Whether a particular framework applies to an entity, and with what legal status, depends on the applicable jurisdiction and the entity's characteristics.

Who within the organization is accountable for climate-related disclosure?

Accountability is typically layered. The board generally holds oversight responsibility, which may include reviewing how climate-related risks and opportunities are governed and how related disclosures are prepared, and this oversight is sometimes delegated to an audit, risk, or dedicated committee. Management is generally responsible for the operational work of identifying climate-related matters, gathering data, designing and operating controls over the reported information, and preparing the disclosure. Assurance functions, where engaged, provide independent evaluation rather than ownership. The precise allocation depends on the entity's governance structure and any applicable legal or regulatory requirements.

How should an organization decide which disclosure obligations actually apply to it?

This is generally a jurisdiction- and fact-specific analysis. Organizations typically map the securities laws, regulations, and listing rules in each place they are incorporated, listed, or operate, and consider thresholds such as size, sector, and entity type that may trigger or exempt them. Where obligations arise from more than one regime, the requirements may differ in scope, timing, and content. Because interpretation can turn on specific facts, entities commonly involve legal counsel and relevant subject-matter specialists. This entry is educational and not legal, audit, or compliance advice.

What role do internal controls play in climate-related disclosure?

Where climate-related information is included in regulated reporting, it may fall within the scope of the organization's disclosure controls and, depending on the regime, its controls over financial or sustainability reporting. Management generally designs and operates these controls to support the completeness, accuracy, and reliability of reported information, and it is useful to distinguish control design from operating effectiveness when evaluating them. The specific control expectations depend on the applicable regime, the nature of the data, and whether the information is subject to assurance. Frameworks addressing internal control may inform, but do not by themselves dictate, what is required.

How does assurance over climate-related disclosure differ from assurance over financial statements?

Assurance over climate-related disclosure can vary in scope, subject matter, and the level of confidence provided, and in some jurisdictions it may be voluntary while in others it is being introduced on a phased or graduated basis. The information involved often includes qualitative and forward-looking elements and data drawn from sources outside traditional financial systems, which can affect how it is examined. Whether assurance is required, who may provide it, and what level applies depend on the relevant regime and the entity's circumstances. This entry describes concepts generally and does not substitute for professional judgment or advice.

Common misconceptions

Climate-related disclosure is a single, universally mandatory global requirement.

Whether climate-related disclosure is legally required, and in what form, depends on the jurisdiction, sector, listing venue, and entity type. Some regimes impose binding requirements through law, regulation, or listing rules, while other frameworks are voluntary or serve as best-practice guidance. Practitioners should confirm which obligations, if any, apply to their specific entity.

Publishing climate metrics such as emissions figures satisfies the full scope of a disclosure framework.

Metrics and targets are generally only one component. Many frameworks also call for governance, strategy, and risk management disclosures. Reporting quantitative data without describing how climate risks are overseen and managed typically does not meet the framework's overall structure.

Climate-related disclosure is the board's operational responsibility.

Typically, the board provides oversight of how climate-related risks and opportunities are managed, while management is responsible for the day-to-day identification, assessment, and reporting processes. Attributing the operational preparation of disclosures to the board, or the oversight duty to management, misstates where accountability generally sits.

Best practices

Confirm at the outset which frameworks and legal requirements actually apply to your entity by jurisdiction, sector, listing status, and size, and distinguish binding obligations from voluntary guidance before designing the disclosure.

Address each component the applicable framework calls for, commonly governance, strategy, risk management, and metrics and targets, rather than defaulting to quantitative data alone.

Clearly delineate the respective roles of the board, its relevant committees, and management in the governance disclosure so that oversight and operational responsibilities are not conflated.

Integrate climate risk identification and assessment into the entity's existing enterprise risk management processes and document how that integration works, rather than treating climate as a stand-alone silo.

Disclose the basis of preparation, scope boundaries, key assumptions, and estimation methods so users can assess the reliability and comparability of reported information.

Engage legal, compliance, risk, and assurance functions on the accuracy and completeness of disclosures, and treat any framework guidance as educational input rather than a substitute for professional judgment on the entity's specific facts.