The government is to introduce a law requiring 1,300 of the UK’s largest companies and financial institutions to report climate-related financial information.
In a statement today (October 29), the Treasury said the UK’s largest traded firms, banks and insurers, alongside private companies with more than 500 employees and £500m in turnover will be mandated to disclose climate-related risks and opportunities from April next year.
This is in line with recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD), a taskforce set up by the Financial Stability Board in 2015 to improve and increase the reporting of climate-related financial information.
The Treasury said the requirements will help investors and businesses “to better understand the financial impacts of their exposure to climate change” as well as allowing them to price climate-risks more accurately while supporting the “greening” of the UK economy.
It added: “By applying a common set of requirements aligned with the TCFD recommendations, UK companies will be provided with a uniform way to assess how a changing climate may impact their business model and strategy, and ensure they are well placed to harness opportunities from the UK’s transition to net zero.”
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.”
Economic secretary to the Treasury John Glen said the requirements would not only help tackle greenwashing, they would enable investors and businesses to align their long-term strategies with the UK’s net zero commitments.
“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," he said.
Certain firms are already providing TCFD-aligned disclosures on a voluntary basis, including Tesco, Aviva and Unilever.
Chris Cummings, chief executive of the Investment Association, said the regulations were an important step in taking an economy-wide approach to addressing climate change.
“TCFD-aligned disclosures are a crucial part of managing the impact of climate change; supporting companies to focus on the effects of climate change on their business and communicating how these are being managed to their investors and other stakeholders," he said.
“IA members are major investors in UK listed and private companies, so enhancing climate-related disclosures will enable investment managers to provide the necessary support and challenge, through their stewardship role, to their investee companies, as they transition to more sustainable business models.”
Last week the government’s first green gilts went on sale, but were criticised for the low returns rate they offer.