The UK Chancellor, Rishi Sunak, has unveiled new environmental reporting standards to weed out companies who are simply ‘greenwashing’, and support the transition to a greener financial system.
The new 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.
The government says that around 70% 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 means it is leading to greenwashing, misleading investors and consumers about how green a product really is.
The new Sustainability Disclosure Requirements (SDR) will ensure investors have the information they need to make informed decisions about where to put their money.
Sunak said; “We are already a world leader in green finance, and the 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 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.
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.
This will ensure consumers and investors have all the information they need to make investment decisions that drive a positive environmental impact. It includes requiring every investment product to set out – for the first time – the environmental impact of the activities it finances, and justify clearly any sustainability claims it makes. Asset managers will also need to set out how they incorporate sustainability into their investment strategy to allow consumers to make informed judgements about the kind of firms they want to invest in.
SDR will set out expectations for certain firms around the publication of transition plans in the context of the UK’s net zero commitment.
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. And, it acts as a call to action for the pensions and investment sector, setting expectations that they will use the information generated by the SDR to start shifting financial flows to align with a net zero economy.
Specific reporting requirements, including scope, timing and detail, will be developed following public consultation.