- “Greening Finance: A Roadmap to Sustainable Investing” was released today by HM Treasury. It includes new requirements for firms to set out their transition plans to net zero in 2050, and whether their activities can be truly ‘green’.
- The Roadmap is due to be published at 18:00 BST on 18 October 2021.
- New disclosure requirements mean that companies, financial firms and markets of financial products will need to explain how they are managing climate change risks and impacts.
- A more detailed Green Finance Strategy will follow in 2022. This will set out an indicative sectoral transition pathway out to 2050 to align the financial system with net zero.
The UK has today released a Roadmap setting out key measures for greening the financial system and financing the UK’s net zero target. A further, more detailed, financial sector strategy for the net zero transition has been promised for 2022.
The centrepiece of the Roadmap is a new Sustainability Disclosure Requirements (SDR) regime which will put an onus on corporates, asset owners, asset managers, and marketers of investment products, to explain the climate risks and impacts of their activities.
The new requirements for financial firms mean they will now have to publish climate transition plans. This game-changing adjustment to financial regulation was recently called for in a letter by leading UK companies, later echoed by the Labour party. Initially, the UK’s requirement is for a ‘comply or explain’ approach. However, the Roadmap signals that it will become fully mandatory in time.
The Roadmap also outlines next steps for the new UK Green Taxonomy which will define what investments are “green”, building on the precedent set by the EU and adjusting it for the UK context. Furthermore, the taxonomy will use science-based principles to guide future private and public financial investments in the UK climate transition.
Kate Levick, E3G Associate Director, Sustainable Finance, said:
“As these exciting new policies develop in detail it will be crucial that they remain aligned with scientific advice and send clear market signals of the urgency and scale of the required shift in investments. The 2022 Green Finance Strategy will be key to the UK’s future success as an international hub for green investment and green finance expertise.”
Heather McKay, E3G Policy Advisor, UK Sustainable Finance, said:
“Net Zero is the biggest investment opportunity the UK has ever seen – and appetite from the market is growing. To support investors in capturing the opportunities of net zero, clear signals need to be sent by government on what is green and what is not. The crucial step now is to ensure the UK Green Taxonomy is science based – critical to tackling greenwash.”
Iskander Erzini Vernoit, E3G Policy Advisor, said:
“The commitment to require transition plans marks a step change in approaches to greening finance and corporate activity. It is world-leading action from this year’s UK COP Presidency, although more is necessary to re-align investments away from a catastrophic climate future—the move to mandatory disclosures must be underpinned by clear sector-specific guidance on aligning with 1.5C.”
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Kate Levick, Associate Director, Sustainable Finance, E3G
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Heather McKay, Policy Advisor, Sustainable Finance, E3G
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Iskander Erzini Vernoit, Policy Advisor, Sustainable Finance, E3G
Iskander.email@example.com | +44 (0) 771 253 7878
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- See: https://www.bloomberg.com/news/articles/2021-10-10/aviva-tesco-want-u-k-to-mandate-corporate-net-zero-plans
- See: https://labour.org.uk/press/labour-calls-on-government-to-mandate-1-5c-aligned-transition-plans-for-financial-institutions-and-major-companies-to-turbocharge-the-global-shift-to-net-zero-and-make-the-uk-the-green-finance-capital/
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