Government outlines plans to make climate risk reporting mandatory for large firms

Large business and financial institutions will be required to detail their exposure to climate risks under new regulations to be implemented within the next five years.

In a statement to MPs, UK chancellor Rishi Sunak described a new post-Brexit chapter for the financial sector: “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. We’re announcing the UK’s intention to mandate climate disclosures by large companies and financial institutions across our economy, by 2025.”

He added that the plans go further than recommendations by the Taskforce on Climate-related Financial Disclosures (TCFC), making the UK the first G20 country to do so.
He said: “We’re implementing a new ‘green taxonomy’, robustly classifying what we mean by ‘green’ to help firms and investors better understand the impact of their investments on the environment.”

To help the UK meet its 2050 net-zero target and other environmental objectives, the government also announced that it will issue its first Sovereign Green Bond in 2021 subject to market conditions, and intends to follow up with a series of further issuances to meet growing investor demand for these instruments. The aim is for these bonds to help finance projects that will tackle climate change, finance infrastructure investment and create green jobs across the country.

Industry bodies largely welcomed the proposals. In a statement, the Association of British Insurers said: “We also welcome the announcement of the first UK Sovereign Green Bond and the move towards a comprehensive approach on TCFD disclosure requirements. Both are vital steps towards net-zero progress where the insurance and long-term savings sector has a key role to play in decarbonising our economy.”

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