In his opening keynote speech at the COP26 climate conference’s “Finance Day” on Wednesday, UK’s Chancellor of the Exchequer Rishi Sunak unveiled the next step in the country’s plans for sustainability reporting, announcing that the UK will introduce requirements for mandatory disclosure of net zero transition plans from UK financial institutions and listed companies.
The Chancellor explained that as massive amounts of private capital are set to flow into financing the transition to net zero, investors will require increasing information regarding the impact of those investments.
Referring to an announcement earlier in the day from Glasgow Financial Alliance for Net Zero (GFANZ), that more than 450 financial services firms representing $130 trillion in capital have committed to align their investments and activities with net zero goals, Sunak said:
“This is an historic wall of capital for the net zero transition around the world.
“What matters now is action: to invest that capital in our low carbon future.
“To do that, investors need to have as much clarity and confidence in the climate impact of their investments as they do in the traditional financial metrics of profit and loss.”
Providing more details on the plans, HM Treasury, the UK’s economic and finance ministry said that a new Transition Plan Taskforce will be convened composed of industry and academic leaders, regulators, and civil society groups, to develop a “gold standard” for transition plans, in order to guard against greenwashing.
The introduction of the new plan follows the announcement last week by the UK government that it will introduce legislation effective April 2022 requiring more than 1,300 of the country’s largest publicly listed companies and financial institutions to provide disclosures regarding climate-related financial risks and opportunities, in line with Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
As regulators and governments increasingly introduce requirements for financial climate-related reporting, transition plan disclosure is emerging as the next frontier for sustainability reporting. Last month, the TCFD released its first set of guidance for companies to disclose their plans and progress relating to their climate transition strategies.
Sustainable investment-focused groups welcomed with UK’s plans, with non-profit Ceres advocating for other jurisdictions to institute similar rules. Kirsten Spalding, Senior Program Director of the Ceres Investor Network, said:
“The UK’s new policy is making mandatory what Ceres and the other founding partners of the Investor Agenda have long called for, that every institutional investor develop and implement Investor Climate Action Plans for decarbonizing their portfolios by 2050 or sooner and reaching interim emissions reduction targets by 2030. The US government and governments around the globe should follow the UK’s lead. As the world confronts ever increasing suffering and financial losses from climate disasters, governments must move faster to put the right policies and regulations in place, and investors and companies must shift from commitment to real action.”