Certain large businesses will need to set out their green credentials to potential investors under new “world-leading” reporting rules outlined by chancellor Rishi Sunak this week.
The requirements, which will also apply to pension schemes, investment products and asset managers and owners, are part of the government’s landmark reforms to create a greener financial system.
Around 70 per cent of the UK public want their money to go towards making a positive difference to people or planet. But the lack of common definitions around environmental sustainability is leading to greenwashing – misleading investors and consumers about how green a product really is.
The new Sustainability Disclosure Requirements (SDR) will ensure that investors have the information they need to make informed decisions about where to put their money.
Following the publication of a new report setting out further details of how SDRs will work, the chancellor said: "We are already a world leader in green finance, and [this] roadmap will give us the opportunity to set new global standards for sustainability that 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."
The report, entitled Greening Finance: A Roadmap to Sustainable Investing, comes ahead of the UK hosting COP26 next month and is part of the chancellor’s plan for the UK to lead the world in green finance and sustainable investing.
The roadmap outlines the legislative and regulatory changes that will be made across the economy to arm investors and consumers with the right information by setting world-leading standards on environmental sustainability reporting.
First announced at the chancellor’s Mansion House speech earlier in the year, the new integrated regime will bring together and streamline existing climate reporting requirements – such as the UK’s commitment to implement mandatory reporting aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) – and go further.
The roadmap also sets out more details on a new green finance rulebook – the UK Green Taxonomy – which will create a shared understanding of which economic activities count as green. Relevant companies and financial products will be required to report their environmental impact against the UK Green Taxonomy.
Rain Newton-Smith, CBI chief economist, said: “Expanded standards for environmental reporting are key for supporting the transition to a greener financial system. Greater clarity on environmental impacts will help investors channel finance into projects that are aligned with net zero targets and will reduce carbon emissions across our economy.
“Business looks forward to working with the government to design this new framework.”