The UK is set to become the first country in the world to require companies to disclose their climate-related financial risk.
Chancellor Rishi Sunak this week announced the introduction of more robust environmental disclosure standards that will allow investors and businesses to understand exposure to climate change and price climate-related risks more accurately.
The UK plans to take existing recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) and make them legal obligations by 2025, going beyond the current “comply or explain” approach.
The TCFD is a private sector led group convened by the Financial Stability Board in 2015. It published a report in 2017 which recommended companies publicly report on financial risks and opportunities from climate change.
The government believes financial disclosures are a key part of tackling climate change.
This week, investment firm Fidelity International published a study that found a strong positive correlation between a company’s relative market performance and its ESG rating.
Foodservice businesses have generally been slower than those in other sectors to publicly align their operations with targets such as net zero.
The new reporting requirements were announced as part of a package of measures to bolster the dynamism, openness and competitiveness of the UK’s financial services sector. They included the issuing of the UK’s first ever sovereign green bond, which will help finance projects to tackle climate change, invest in green infrastructure and create green jobs across the country.
The UK will also implement a green taxonomy – a common framework for determining which activities can be defined as environmentally sustainable – which the government says will improve understanding of the impact of firms’ activities and investments on the environment and support the UK’s transition to a sustainable economy.
Sunak said: “Our plans will ensure the UK moves forward as an open, attractive and well-regulated market, and continues to lead the world in pioneering new technologies and shifting finance towards a net zero future.”