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Call for clearer information on climate change spending

02 February 2022
  • More climate change detail needed in financial statements

    If an organisation is talking about tackling the climate emergency but not putting its money where its mouth is, you could argue it is just hot air.

    We’ve been looking at public bodies’ spending on climate change by reading their ‘financial statements’, the documents that describe their financial performance and core activities.

    What we found was really interesting – the financial statements say very little about climate change.

    That doesn’t necessarily mean that bodies are not spending money on this critical issue. It means that if public bodies are spending money on climate change, they are not describing it in clear detail in their financial statements. The current rules don’t require them to.

    Auditor General calls for action

    The Auditor General has already committed to a long-term programme of work on climate change and he has now called for greater disclosure of information about climate change activities in the financial statements of public bodies.

    In his keynote speech to the ICAEW Public Sector Sustainability Conference in December 2021, he said that more information about climate change activities could drive investment and long-term decision making. He also recognised that the current reporting frameworks do not require public bodies to say much about climate change.

    What are bodies required to report on in their financial statements?

    Disclosures in financial statements are driven by requirements specific to the type of public body.

    Local government disclosures are driven by the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice. Health body disclosures in Wales are driven by the Manual for Accounts (MFA), which is produced by the Welsh Government. Both are underpinned by the International Financial Reporting Standards (IFRS).

    The Code of Practice and IFRS only require a consideration of climate change risks and other emerging risks which could be significant (material) to the accounts.

    The MFA requirements are slightly more specific, requiring health bodies to include in the financial statements, a performance report, which contains three tables covering: greenhouse gas emissions, waste and use of resources (including water consumption).

    The MFA also requires health bodies to report on climate change adaptation [opens in new window] and on the impact their operations have on the environment, as part of wider sustainability reporting (which is separate to the financial statements).

    What did we find in the financial statements?

    In local government statements we found no financial figures directly relating to decarbonisation or tackling climate change. Such information might be buried in the statements’ detail on service areas but it is not clear to the reader.

    NHS financial statements are very structured as all health bodies fill out a set template. The template includes the three tables described above, which provide some very interesting information such as greenhouse gas emissions, but as with local government there were no financial disclosures around how much health bodies are spending on tackling climate change.

    Green shoots?

    A wider discussion about the purpose of financial statements has begun. Should public sector financial statements simply act as a financial snapshot of annual performance, or should they provide information on issues important corporately and in the public consciousness? If the latter is the case, do disclosure requirements need a rethink?

    The Financial Reporting Council thinks that financial statements should have more detail about climate change. The organisation that regulates auditors, accountants and actuaries and promotes transparency and integrity, has published an article [opens in new window] called ‘Time to raise the bar on climate change reporting’. The article says that “corporate reporting needs to improve to meet the expectations of (…) users on the urgent issue of climate change”.

    In an encouraging development, the IFRS Foundation is setting up an International Sustainability Standards Board (ISSB) for setting sustainability reporting standards. It is hoped the ISSB will publish its first draft of the standards in early 2022.


    The financial statements of public bodies in Wales do not give much away about how much is being spent to tackle climate change. This is largely because the rules do not require them to, and any financial disclosures are made on a voluntary basis. Considering the pressures public bodies are under and the difficulty in ascertaining financial information related to climate change, perhaps this is understandable. However, if financial statements were clearer about climate change spending, there could be greater transparency and accountability for climate change action. And the developments around new sustainability reporting standards look encouraging.


    About the author

    My name is Ben Hughes, and I am a financial audit trainee at Audit Wales. As part of the trainee scheme, I have been given the opportunity to undertake a secondment, and was fortunate enough to do this with our National Studies Team. The National Studies Team lead on Wales-wide studies which examine issues relating to the economy, efficiency, and effectiveness with which the Welsh Government and its related public bodies use their resources.