Rishi Sunak says disclosures will be mandatory within five years as part of net-zero plans
Sunak said departure from the EU meant the UK’s financial services sector – which employs more than a million people – was entering a new chapter. Photograph: Toby Melville/Reuters
Large companies and financial institutions in the UK will have to come clean about their exposure to climate risks within five years under the terms of a tougher regime announced by the chancellor, Rishi Sunak.
In an attempt to demonstrate the government’s commitment to tackling global heating, Sunak said the UK would go further than an international taskforce had recommended and make disclosure by large businesses mandatory.
The chancellor also announced plans for Britain’s first green gilt – a bond that will be floated in the financial markets during 2021 with the money raised paying for investment in carbon-reducing projects and the creation of jobs across the country.
In a Commons statement, Sunak said departure from the EU meant the financial services sector – which employs more than a million people – was entering a new chapter.
“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, going further than recommended by the Task Force on Climate-related Financial Disclosures, and the first G20 country to do so.”
The Treasury said the new disclosure rules and regulations would cover 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, pension schemes regulated by the Financial Conduct Authority and occupational pension schemes.
The government plans to make Britain a net-zero-carbon country by 2050 and the previous governor of the Bank of England, Mark Carney, told a London conference that the Covid-19 pandemic illustrated the dangers of ill-preparation and of underestimating risks.
Climate change was “a crisis that involves the whole world and from which no one will be able to self-isolate”, Carney said on Monday.
His successor at Threadneedle Street, Andrew Bailey, said the decision to issue a green bond underlined the UK’s commitment to combating climate change – as did Sunak’s announcement that disclosures related to climate change risk would be mandatory by 2025.
Sunak, Carney and Bailey were all speakers at the Green Horizon summit, which took place in London on what would have been the first day of the UN climate change conference in Glasgow had Covid-19 not forced the postponement of the event.
Bailey said: “Our goal is to build a UK financial system resilient to the risks from climate change and supportive of the transition to a net-zero economy. In the aftermath of the financial crisis we took far-reaching action to make the financial system more resilient against crises – Covid is the first real test of those changes.”
Doug Parr, Greenpeace UK’s policy director, said: “Tackling climate change means the corporate sector is not just green round the edges but green right to its core. The chancellor’s plans to make disclosure mandatory for companies is right if the rules are compulsory and thorough.
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“The real win would be to make all financial institutions put in place plans to meet the Paris climate agreement by the end of next year, steadily choking off the supply of cash to planet-wrecking activities. Disclosure is a route to making that happen, but not an end in itself.”
Roger Barker, the director of policy and corporate governance at the Institute of Directors, said: “What gets measured gets changed. The problem is there’s a hundred and one different ways of measuring climate impact out there right now. It’s a confusing landscape for companies and investors alike, so bringing in common standards is absolutely the right thing to do.
Fran Boait, the executive director of the campaign group Positive Money, said: “We desperately need more green public investment if we are to have a fair, green transition, so it’s positive that the government has signalled that it is finally taking this more seriously, by issuing green gilts for the first time.”