Companies to report financial risks from climate change by 2022
Publicly listed companies and large asset owners will be required to disclose by 2022 how climate change risk impacts their activities.
The government has launched its Green Finance Strategy, to increase investment in sustainable projects and infrastructure, and ensure the UK meets its 2050 net zero carbon emissions target.
The strategy sets expectations for publicly listed companies and large asset owners to disclose by 2022 how climate change risk impacts their activities. Work with regulators will explore the most effective way of doing this, including whether mandatory disclosures are necessary.
In its statement, the government said it will be clarifying the need for financial regulators to have regard for climate change when advancing their objectives and discharging their functions – including the Prudential Regulatory Authority (PRA), Financial Conduct Authority (FCA) and Financial Policy Committee (FPC).
"The UK has a long history of leading the way in tackling climate change, but we need to do more to protect our planet for future generations," said City Minister, John Glen.
"Today’s Green Finance Strategy will support this ambition, with new initiatives to boost funding for green ventures and ensure the environment is at the centre of all financial decision-making," added Mr Glen.
Last week the UK became the first major economy in the world to pass laws to end the country’s contribution to global warming by 2050, putting clean growth at the heart of the modern Industrial Strategy.
Regulators welcome government's move
In a joint statement, the FRC, the PRA and the FCA welcomed the government's initiative.
"Climate change is one of the defining issues of our time. We recognise it presents far-reaching financial risks relevant to our mandates from both physical factors, such as extreme weather events, and transition risks that can arise from the process of adjustment to a carbon neutral economy.
"Companies should consider the likely consequence of climate change on their business decisions, in addition to meeting their responsibility to consider the company’s impact on the environment," the regulators said.
They agreed that financial risks will be minimised by achieving an orderly transition and via a collective response.
"We welcome the action being taken as part of the UK’s Green Finance Strategy to ensure a coordinated approach and look forward to further collaboration to advance progress in the near term on climate-related issues."