Chancellor makes climate-related financial disclosures mandatory

Large UK companies in the private sector will all be forced to disclose their financial exposure to climate change by 2025 under new regulations unveiled by chancellor Rishi Sunak yesterday.

The rules will make the UK the first G20 country to require mandatory reporting aligned with the Task Force on Climate-related Financial Disclosures (TCFD), going beyond the 'comply or explain' approach. A roadmap for implementing the disclosures – many of which will come into force by 2023 – was also published by the government yesterday. Moreover, the chancellor announced that the UK will issue its first sovereign green bond in 2021 to finance projects that tackle climate change, following in the footsteps of France, Germany, Belgium and the Netherlands. “We are starting a new chapter in the history of financial services and renewing the UK's position as the world's pre-eminent financial centre,“ Sunak said. “This new chapter means putting the full weight of private sector innovation, expertise and capital behind the critical global effort to tackle climate change and protect the environment.“ The mandatory TCFD reporting will apply to all listed commercial companies, UK-registered large private firms, banks, building societies, insurance companies, asset managers, life insurers, and pension schemes regulated by the Financial Conduct Authority. Sunak also announced that the UK will implement a green taxonomy framework for determining which business activities can be defined as environmentally sustainable, using the scientific metrics in the EU taxonomy as its basis. In addition, he pledged to join the European Commission's International Platform on Sustainable Finance (IPSF), which already has 14 members representing 50% of global greenhouse gas emissions. In a separate announcement, the government unveiled the creation of an Office for Investment to support high-value investments into the UK which align with key government priorities, such as reaching net zero. Kate Levick, sustainable finance programme leader at E3G, said that the “concrete steps on green finance“ will help ensure that Britain remains among the top tier of countries internationally. “As president of the G7 and COP26 in 2021 we fully expect to see the UK go even further next year,“ she continued. “Key opportunities to show global leadership could include mandating net-zero transition plans for financial firms or establishing a new national investment bank with a net-zero mandate.“ Image credit: Shutterstock