UK firms must reveal path to net zero by 2023
Most large UK firms must show by 2023 how they plan to reach climate change targets under new Treasury rules. Importantly, detailed plans on low-carbon futures must be made public in line with the UK’s 2050 net zero target.
Chancellor Rishi Sunak announced the new rules in a COP26 climate summit speech. During his message, he highlighted the UK’s vision to become the “first-ever net-zero aligned global financial centre.”
Under new regulations, firms and financial institutions must publicly disclose detailed plans showing their transition to a low-carbon future. They’ll also have to disclose how they plan to adhere to the UK’s 2050 net zero targets.
Read more: “Net Zero Jargon Buster”
Importantly, the plans will be submitted to an expert panel for review to ensure they are not just “spin.”
It is said that any commitments will, however, not be mandatory, which climate groups decry. The Treasury argues that the market will decide if firms’ plans are credible.
It is reported that 450 firms who control 40 percent of global financial assets, which is equivalent to £95 trillion, have agreed to commitments to limit global warming to 1.5 Celsius above pre-industrial levels.
The news rules announced during COP26 come a week after the UK government announced that big businesses, large asset managers, and institutional investors must reveal sustainability credentials under a refreshed green reporting regime. These rules state that an investment product will now have to set out the environmental impact of the activities it finances through the new sustainability disclosure requirements (SDR).
However, the implication for businesses is that they will have to justify all sustainability claims that generate from an investment. Businesses will also need to tell investors how they are focusing on green investments in their strategy.
Businesses are increasingly being put into a significant position to help the UK deliver on its net zero targets. Policies, subsidies, and legislation encouraging businesses to decarbonise are a likely outcome of COP26.
The slate of new green rules from the UK, however, means that firms and their shareholders must decide how their businesses will adapt and transition to a low-carbon economy.
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