Pension schemes and asset managers will have to start disclosing their environmental impact under new reporting rules outlined by the UK government this week.
In a report published on Monday, the Treasury explains how new Sustainability Disclosure Requirements will streamline existing climate reporting standards – such as recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) – and go further.
For the first time, this will include requiring every investment product to set out the environmental impact of the activities it finances, and justify clearly any sustainability claims it makes.
Asset managers will also need to explain how they incorporate sustainability into their investment strategies, allowing consumers to make informed judgements about the kind of firms they want to invest in.
Moreover, companies will be expected to publish their transition plans in the context of the UK's net-zero emissions target, with specific requirements to be developed after a public consultation.
Chancellor Rishi Sunak said that the new rules will “boost the economy, protect the planet and support our net-zero goals”.
“We want sustainability to be a key component of investment decisions, and our plans will arm investors with the right information to make more environmentally-led decisions,” he added.
Relevant companies and financial products will be required to report their environmental impact against a UK Green Taxonomy, which will create a shared understanding of which economic activities count as 'green'.
The Treasury said that the rules are “a call to action” for the pensions and investment sector, setting the expectations that they will use to start shifting financial flows to align with a net-zero economy.
This comes as the UK prepares to host the COP26 climate summit next month, with the government having also published its Net Zero Strategy, setting out how the country will decarbonise by 2050.
Ben Wilson, director of corporate affairs and climate change at the Association of British Insurers, commented: “The publication of the sustainable investment roadmap is an important step forward, and we are pleased that the government supports our call for mandatory transition plans across the economy.
“Consistent sustainability reporting is critical to reaching net zero, and can help unleash the investment we need to get on track and track progress against transition plans.”
Image credit: iStock
Author: Chris Seekings