UK to enshrine mandatory climate disclosures for largest companies in law
Firms will be required to disclose climate-related financial information, ensuring they consider the risks and opportunities they face as a result of climate change.
The UK will become the first G20 country to enshrine in law mandatory TCFD-aligned requirements for Britain’s largest companies and financial institutions to report on climate-related risks and opportunities.
From 6 April 2022, over 1,300 of the largest UK-registered companies and financial institutions will have to disclose climate-related financial information on a mandatory basis – in line with recommendations from the Task Force on Climate-Related Financial Disclosures. This will include many of the UK’s largest traded companies, banks and insurers, as well as private companies with over 500 employees and £500 million in turnover.
The Taskforce on Climate- Related Financial Disclosures (TCFD) is an industry-led group which helps investors understand their financial exposure to climate risk and works with companies to disclose this information in a clear and consistent way. It was launched at the Paris COP21 in 2015 by the Financial Stability Board (FSB) and Mark Carney, the UN Special Envoy on Climate Action and Finance and UK Finance Adviser for COP26, and has since published a clear and achievable set of recommendations on climate-related financial disclosures.
Our decision to require mandatory disclosures comes ahead of the G20 and COP26 summits, and it will increase the quantity and quality of climate-related reporting across the UK business community, including among some of the most economically and environmentally significant companies. This will ensure businesses consider the risks and opportunities they face as a result of climate change and encourage them to set out their emission reduction plans and sustainability credentials.
The new requirements will help investors and businesses to better understand the financial impacts of their exposure to climate change, and price climate-related risks more accurately, while supporting the greening of the UK economy. By applying a common set of requirements aligned with the TCFD recommendations, UK companies will be provided with a uniform way to assess how a changing climate may impact their business model and strategy, and ensure they are well placed to harness opportunities from the UK’s transition to net zero.
Energy and Climate Change Minister Greg Hands said “If the UK is to meet our ambitious net-zero commitments by 2050, we need our thriving financial system, including our largest businesses and investors, to put climate change at the heart of their activities and decision making.
By mandating large businesses to disclose their climate risks and opportunities – the first G20 country to do so – we are showing global leadership by making our financial system the greenest in the world.”
Companies already providing TCFD-aligned disclosures and experiencing the benefits include Tesco, Aviva, and Unilever.
Today’s legislation will become law in April 2022 subject to Parliamentary approval, puts the government on track to achieve its ambition of the UK becoming the first G20 country to mandate TCFD-aligned climate disclosures across the economy – as set out by the Chancellor of the Exchequer in November 2020.
The UK government has been delivering on our green finance ambitions through a package of recent measures, including the recent Sovereign Green Bond issuances, and a commitment to set out an indicative sectoral transition pathway to 2050 to align the financial system with the UK’s net zero commitment.
It follows last week’s publication of the Net Zero Strategy, which outlined a commitment to ensure the UK’s financial system is the greenest in the world, driving ambition on global green finance as the UK prepares to host the upcoming UN COP26 summit.
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