The UK Autumn Budget 2024, presented by Chancellor Rachel Reeves on 30 October, introduced significant climate change related measures designed to promote long-term growth and stability.
These initiatives align with the UK’s commitment to net-zero emissions and place additional emphasis on the integration of climate-related factors in corporate financial reporting under the UK-CFD (Climate-related Financial Disclosures) framework.
Implications for Climate Reporting - Message from our CEO
"These budget measures underscore the critical role of UK-CFD compliance, positioning climate disclosures not as a regulatory burden but as a valuable component of financial resilience. Companies need to ensure their disclosures address both physical and transition risks related to climate change, particularly around high-emission assets, while also considering potential tax benefits from sustainable practices. This approach aligns financial resilience with regulatory and stakeholder expectations." - Jose Hopkins, Founder and CEO Simplify Climate.
Investment in Green Infrastructure: The budget allocates £2 billion towards renewable energy projects, such as offshore wind and solar, to reduce fossil fuel reliance and increase energy sector resilience. For companies, this funding can influence accounting for long-term energy costs, as a shift toward renewables may affect asset management, operating expenses, and impairments associated with traditional energy sources. Additionally, this funding supports broader climate goals under UK-CFD by encouraging businesses to transition towards sustainable energy, which may reduce reported Scope 2 emissions.
Support for Electric Vehicles (EVs): The budget offers incentives for electric vehicle adoption, providing grants for purchases and expanding EV infrastructure in underserved areas. This aligns with UK-CFD requirements to report Scope 1 (direct) emissions, as well as Scope 3 emissions, related to supply chain and transport impacts. Accounting teams may need to consider these incentives when calculating fleet depreciation, claiming grants, and evaluating their impact on carbon footprint disclosures, particularly for companies with large vehicle fleets.
National Grid and Renewable Energy Storage: Budget funds allocated to enhance grid capacity and develop innovative energy storage solutions will support intermittent renewables like wind and solar, providing more stable energy. This move may indirectly affect energy costs and grid reliability for businesses. Additionally, under UK-CFD reporting, companies may be required to disclose these potential changes in energy dependency and how this affects operational continuity and resilience in their financial disclosures.
Expansion of Carbon Capture and Storage (CCS): The budget supports CCS pilot projects in industrial hubs, which could help high-emission sectors mitigate their carbon output. For businesses engaged in these initiatives, UK-CFD reporting will likely require disclosures on these activities, including capital investments in CCS, their effects on emissions reduction, and potential financial impacts on long-term asset valuation. Accountants should prepare for adjustments in capex and opex tracking and consider potential subsidies or tax credits associated with these technologies
Increased Tax on High-Emission Sectors: The budget introduces higher taxes for high-emission industries, such as oil and gas, to fund green investments. This tax increase encourages businesses in these sectors to invest in emission reduction strategies. From an accounting perspective, higher taxes may increase the cost of capital or impact deferred tax calculations, particularly for companies with substantial carbon liabilities. Accountants will also need to evaluate how these taxes affect cash flow projections, asset valuations, and potential tax credits or offsets associated with emissions reductions.
How can we support you?
Our team specialises in guiding companies through frameworks such as the TCFD, UK-CFD, IFRS S1, IFRS S2, and more. With our expertise, companies can establish a robust foundation for integrating climate-related, social impact, and sustainability factors by assessing and aligning your organisation’s strategy, governance, risk management, and reporting with relevant sustainability, social, and climate change frameworks creating a strong approach to managing environmental risks and helping you stay ready for what’s next.
Email help@simplifyclimate.co.uk to arrange a discussion with our consultants.
Comments