Days ahead of the COP26 climate conference, the UK government announced formal plans to introduce legislation requiring mandatory climate-related disclosure by companies and financial institutions.
The legislation is expected to become law in April 2022, at which time more than 1,300 of the country’s largest publicly listed companies and financial institutions will become the first to provide reporting in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
Companies to be covered by the new legislation include UK registered companies, trading on a UK registered market, with more than 500 employees, as well as private companies with over 500 employees and £500 million in revenue.
According to a government statement announcing the legislation, the new requirements are aimed at helping investors and businesses to better understand the financial impacts of their exposure to climate change, and to more accurately price climate-related risk, while supporting the “greening” of the UK economy.
Energy and Climate Change Minister Greg Hands said:
“If the UK is to meet our ambitious net-zero commitments by 2050, we need our thriving financial system, including our largest businesses and investors, to put climate change at the heart of their activities and decision making.
“By mandating large businesses to disclose their climate risks and opportunities – the first G20 country to do so – we are showing global leadership by making our financial system the greenest in the world.”
In November 2020, UK’s Chancellor of the Exchequer Rishi Sunak pledged to make the UK the first country in the world to mandate economy wide disclosures in line with the TCFD. Today’s announcement follows the publication last week by HM Treasury, the UK’s economic and finance ministry, of “Greening Finance,” a new report detailing the government’s sustainable investing roadmap, along with its strategy to implement new Sustainability Disclosure Requirements (SDR) for businesses and asset managers. The requirements form part of the UK’s Green Finance Strategy, which aims to establish the country as a center for international green finance, and to align the financial sector and capital flows with the delivery of global and domestic climate and environmental objectives.
Economic Secretary to the Treasury John Glen said:
“With COP26 in just a few days, I’m proud that we are taking steps to enshrine the UK’s transition to a greener financial system into law.
“We are already world leaders in green finance, having recently launched the UK’s first Green Savings Bond and raised £16 billion for green projects through our Green Gilts.
“These TCFD requirements will not only help tackle greenwashing but also enable investors and businesses to align their long-term strategies with the UK’s net zero commitments.”