Key Sentence:
- Several large UK companies will have to start disclosing their environmental impact under new Treasury rules.
- These requirements also apply to investment products and pension funds.
This comes ahead of the November 26 COP meeting in Glasgow, where world leaders discuss their climate commitments. The Ministry of Finance says new sustainability disclosure requirements (SDR) mean that investment products must now determine the environmental impact of the activities they fund.
In addition, the company’s sustainability requirements must be “clearly” justified, and the transition plan to zero must be appropriately presented. The goal is to combat green laundering, where companies make misleading claims about their environmental commitment.
However, the government says the information will only be “effective” if customers and investors use it. Chancellor Rishi Sunak said, “We want sustainability to be an important part of investment decisions. And our plan will provide investors with the right information to make more environmentally friendly decisions.”
He said the rules “will set new global sustainability standards that will boost the economy, protect the planet and support our net-zero goal. It’s unclear when the rules will come into effect or what will happen to companies that don’t comply.
Details of specific reporting requirements will only be developed after public consultation.
In July, Mr. Sunak first mentioned SDR and announced the next steps for the requirements in the report: “Environmental Finance: A Roadmap for Sustainable Investment. Sam Alvis of the Green Alliance thinks tank said it was a “positive step towards greening the private sector.”
“While the new green finance is critical, stopping funding for environmentally damaging investments is critical. The upcoming spending review allows the Chancellor to apply the same rules to public spending,” he added. The industry said greater clarity on environmental impacts would “help investors channel funds to projects that meet net-zero targets and reduce our economy’s carbon footprint.”
However, Heather McKay of E3G, an independent think UK Companies tank on climate change, told the BBC that governments need to send a clear signal. What’s green and what’s not” to ensure that companies change the way they work.
He said this was an “important step” in tackling green laundering.
According to Jessica Fries, Chair of Sustainability Accounting, investors and pension funds will make “dark” decisions without the correct information. Barbara Davidson of think tank Carbon Tracker says current accounting requirements for landscapes need to be better enforced.
“Without this, investors would not have the necessary information about the impact of climate change on decision making,” he said.