Transparency Report 2022 - Climate change transcript

How are we addressing the impact of climate change in our audits?

Climate risk has been a critical area of audit focus over the last year and we’ve made significant strides in responding to the growing expectations of us in this area.
Firstly, we’ve provided all of our qualified auditors with training on climate-related risks and their impact on the statutory audit.

Secondly, we’ve encouraged the sharing of knowledge through our Audit climate change industry network and we have also set up a climate audit technical team to provide practical support to our people.

From a policy perspective in the year, every one of our audits has mandatory consideration of climate-related risks.

And for statutory audits with year ends on or after 31 December 2021 we introduced a new policy requiring specific reference of our work on climate in our FTSE 350 audit opinions.

How are we seeing businesses incorporate climate change in their reporting ?

Our published research shows that ESG information – including climate change disclosures – now makes up 26% of the average strategic report, up from 20% last year.

And - 78% of FTSE 350 companies now specifically mention ‘climate change’ in their financial statements – a significant increase on the 22% we saw last year.

For premium listed companies there are mandated climate-related disclosures, and other businesses are now also choosing to include climate-related statements in their reporting.

Businesses are now being judged on more than just their financial performance. We are increasingly seeing non-financial reporting as a differentiator for businesses with greater demand from investors and other stakeholders for reporting that they can trust.

With more regulation on the horizon, businesses must navigate their way through layers of complexity in order to ensure clarity and transparency.

What are we doing to meet the demand for assurance over non-financial climate-related information?

For non-financial information on areas such as ESG, which are not subject to the scope of our statutory audit, we have an established Stakeholder Assurance team, made up of subject matter experts within our audit practice.

This specialist team allows us to focus on key risks and deliver rigorous assurance in response to rising expectations to improve the quality and consistency of non-financial reporting.

There are currently different types and levels of assurance available to companies. Organisations are increasingly seeking independent assurance over key non-financial reporting, whilst stakeholders are looking for more than just limited assurance opinions to give them confidence in the reliability and comparability of the information. This year we provided our first reasonable assurance opinion to a FTSE 100 financial services business on their climate-related metrics.

As more organisations set new climate strategies, demand for independent assurance will increase and we’re committed to playing our part to improve the reliability of reporting in this area.