13th November 2020
Announcements over the last week from Chancellor Rishi Sunak have marked a further step change in hardwiring environmental sustainability as a business imperative. Recognising that financial services are a critical enabler in the drive for net zero, the Chancellor has outlined new proposals to support sustainable financial flows and extend the UK’s global leadership in green finance ahead of hosting COP26 in November 2021.
To help the UK meet its 2050 net zero target and other environmental objectives, the government also signalled its intention to issue its first Sovereign Green Bond in 2021. The stated intention is that these bonds will help finance further projects to tackle climate change, finance further related infrastructure investment and create green jobs across the country.
The Chancellor also announced the introduction of more robust environmental disclosure standards so that investors and businesses can better understand the material financial impacts of their exposure to climate change by pricing climate-related risks more accurately and supporting the greening of the UK economy.
The UK will become the first country in the world to make it mandatory for companies to align their disclosures to the ‘Task Force on Climate-related Financial Disclosures’ (TCFD) framework, going beyond the current ‘comply or explain’ approach.
The joint Government Regulator TCFD Taskforce has now published its interim report with a 2021 to 2025 roadmap for implementing mandatory disclosures, many of which will come into force between 2021 and 2023. The upcoming rules and regulations will capture a significant portion of the economy including listed commercial companies, UK-registered large private companies, banks, building societies, insurance companies, UK-authorised asset managers, life insurers, FCA-regulated pension schemes and occupational pension schemes.
The UK will also implement a green taxonomy – a common framework for determining which activities can be defined as environmentally sustainable – which will improve understanding of the impact of firms’ activities and investments on the environment and support the transition to a sustainable economy.
So, all in all the days of businesses viewing a sustainability plan as a “nice to have” have been well a truly despatched. Embedding change for the better is now a commercial imperative. Keep an eye out for our upcoming White Paper “Change for the Better” which intends to provide some research based guidance on the steps to embed sustainability within an organisation. The report will be available to download next week.