A requirement to file annual climate reports has strengthened public bodies’ grasp of relevant risk factors, sparking a range of further improvements, according to new research from the National Audit Office (NAO).

Published on 28 November, the report evaluates the effects of new obligations upon central government bodies to report in line with the framework devised by the Taskforce on Climate-related Financial Disclosures (TCFD).

Overseen by HM Treasury (HMT), the regime requires bodies with material, climate-related risks to produce their first, full disclosures in their annual reports for the financial year 2025-26. As such, the report looks at how central government bodies’ efforts to prepare for that deadline are influencing their operations.

Significant benefits

NAO notes that at least 117 central government bodies are required to produce TCFD-aligned climate disclosures. With that in mind, the watchdog circulated a survey to bodies it audits within that group to find out how they are faring.

Of those that responded, 91% consider climate risks relevant to them, and 61% regard climate change as either a principal risk, or a component of other principal risks. In parallel, 82% identified physical climate risks to their estates as relevant, while 79% linked those risks to their workforces and service delivery.

More widely, the report says, NAO found examples of emerging good practice that have helped bodies mount a successful response to the new requirements. In particular, it notes, the groundwork behind climate reporting has been at its most effective in cases where there is integration between different government professions – such as finance, sustainability, risk and policy – along with clear senior ownership of the risks and disclosures.

In light of those successful cases, the report points out, TCFD-aligned reporting has potential to deliver “significant benefits” to public bodies – and those that have begun to engage with the framework’s substance have found the exercise valuable.

Operational impacts

Respondents said that using TCFD to prepare their disclosures has boosted senior engagement with climate issues. In the process, it has helped leaders to improve their understanding of related risks, strengthen financial management and identify potential cost efficiencies. For example, one case study notes, in the course of gathering data required for its disclosures on climate-related risks and opportunities, the Ministry of Justice was able to strengthen a number of key business cases ahead of the 2025 Spending Review.

For the past two years, many central government bodies preparing TCFD-aligned disclosures have begun to re-examine and enhance their approach to climate risks. NAO’s findings show that applying the framework in a public sector context “requires bodies to consider a broad range of climate-related risks that may affect them” – from potential operational impacts to their ability to achieve policy aims and support government efforts to lower emissions.

As such, respondents have carried out all-new risk assessments and now better understand the range and severity of the climate risks they are facing.

In another case study, the report explains that the Department for Work and Pensions conducted a risk-identification exercise that drew on functions from across the organisation. It enabled staff to gauge the breadth of potential climate risks the department faces – including the risk that climate change could raise levels of social vulnerability and lead to higher demand on public services and welfare.

The findings also highlighted a need for individual bodies to make their own assessments of climate risks’ significance, in the context of their strategic objectives and other risks they are managing.

In a third case study, the report cites the 2021 Climate Change and Sustainability Strategic Approach from the Ministry of Defence. Still ongoing, the initiative tracks risks that climate change poses to global peace and stability, recognising that forces may need to adapt to fighting in more hostile physical environments.

Four enablers

“The public bodies we interviewed that have made most progress with their TCFD-aligned disclosures have invested time and resource into developing skills and improving disclosures over time,” the report stresses. “This reflects the complexity and novelty of the subject matter, and skills and capability gaps across government.”

Some government bodies told NAO that they have run into hurdles with interpreting HMT guidance and collecting relevant data to meet the framework’s more complex requirements.

Based on the experiences of the more successful bodies, NAO has identified four, key enablers for effective management of TCFD-based reporting:

1. Ownership by an appropriate senior stakeholder Ensure there is an identified senior figure who is responsible for your organisation’s approach to climate risk.
2. Collaborative and cross-functional working Successful climate-related reporting depends upon an integrated response across different government professions.
3. Consideration of a broad range of climate risks Examine any physical, transition-based and public-sector risks that may be relevant to your organisation, beyond the scope of existing reporting around your estates and operations.
4. Capability and access to external expertise Assess your internal capabilities. If you identify gaps, consider opportunities for training, or harnessing external resources.

The report notes that while HMT mandates TCFD-based reporting for central government use and has adapted its framework accordingly. Bodies are responsible for the quality of their own disclosures and their underlying climate-risk management processes. “As with the rest of the annual report and accounts,” it says, “these responsibilities ultimately rest with each body’s accounting officer.”

Early signs of good practice

In a statement, Auditor General and NAO Head Gareth Davies said: “The emerging climate reporting requirements are helping public bodies assess the risks to service resilience. Our report points to early good practice in maximising the value of this work.”

Henning Diederichs, Senior Technical Manager, Reporting, in ICAEW’s Public Sector team, welcomes the report, but notes: “In some ways, it is perhaps a year or two too early, given that organisations are not due to report on TCFD’s strategy pillar until March next year.

“The strategy-related disclosures will be of interest as they require entities to report on actual and potential impacts that climate risks may have on the future provision of goods and services.”

However, he says: “As the obligation to be forward-looking on climate risk may be quite new to some finance professionals, the report is quite right to highlight the importance of different government professions needing to work together.”

Diederichs was surprised to see that such a high proportion of government bodies considers climate change a principal risk, pointing out that once an entity makes that call, it is subject to increased disclosure requirements – such as scenario analysis that looks as far ahead as 2100. “That will no doubt pose some challenges in the years ahead,” he adds, “and we would welcome a follow-up report from NAO.”