In this guidance, we refer to the assurance directors obtain in relation to all their responsibilities, whether that is addressing climate change strategically, reporting in a way that is fair, balanced and understandable, or their accountability for risk oversight and management.

Assurance is derived firstly from management, based on the information and discussions they present to the board. This is known as the first line of defence. Beyond this, second-line risk analysis and monitoring enable management and the board to have confidence in the rigour of processes. Third-line internal audit and assurance provides the board with a view that is independent of management. 

The guidance on this hub will help directors to evaluate how each of these activities supports their need for assurance. It will also help them to determine when external assurance might be required, or add additional insight. In doing so, it aims to support directors in having confidence in the decisions and commitments they are making and in providing meaningful information to investors, employees, customers, suppliers and other stakeholders. 

While this guidance is focused on climate assurance, the principles could be applied to a broader spectrum of environmental and societal issues. The approach of considering climate first is consistent with that taken by many standard-setters and regulators, as well as the companies we talked to. We recommend companies clearly articulate their environmental, social and governance (ESG) priorities to underpin the need for assurance.

Directors face a strategic choice over the nature of assurance they commission to respond to increased climate change expectations. To meet stakeholder expectations, there are a wide range of questions the board and its committees need to discuss to ensure directors fully understand the climate-related risks, the structures and systems within the organisation that underpin these risks, and the assurance they require. This will necessarily build on the existing system of risk management and internal control, including the operation of the lines of defence.

The range of options available to directors in choosing an approach to, and forms of, assurance has become a focal point in the UK with the introduction of reporting requirements for certain large companies aligned with the Task Force on Climate-Related Financial Disclosures (TCFD).

This guidance does not provide advice on the strategic options available in responding to climate change or broader environmental issues. Similarly, it does not seek to assess the reporting frameworks developed to create consistency and comparability between organisations’ disclosures.

While this guidance has been primarily developed for directors and for audit committee members, we recognise it will also be of interest to the wider executive team and to a broader audience of stakeholders that rely on the commitments made by directors.