The UK government’s Department for Business, Energy and Industrial Strategy (BEIS) announced today the launch of a consultation seeking views on proposals to require mandatory Task Force on Climate-related Financial Disclosures (TCFD)-aligned climate reporting by companies.
The proposals from BEIS build on the expectations for all listed companies and large asset owners to disclose in line with TCFD recommendations by 2022, as set out in the UK’s 2019 Green Finance Strategy. This was followed by an announcement in November 2020 by UK Chancellor of the Exchequer Rishi Sunak that the UK would become the first G20 country to make TCFD-aligned disclosures mandatory across the economy by 2025, with a significant portion of mandatory requirements in place by 2023.
While many companies have ramped efforts to operate more sustainably in recent years, and investors have increasingly pursued ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. More integration in their investment decision-making, many often report that one of the greatest obstacles to these initiatives remains the lack of consistent, reliable data to know where to target efforts and to measure, analyze and track progress. The TCFD was established to help address these issues.
The TCFD was established by the Financial Stability Board in 2015, with the goal of developing consistent disclosure standards for companies, in order to enable investors and other stakeholders to assess the companies’ climate-related financial risk. The recommendations were published in June 2017.
The proposals covered by the consultation encompass the scope of requirements, the depth of requirements, the appropriate guidance, and an appropriate monitoring and enforcement regime. The current proposals require companies including publicly traded companies with more than 500 employees or companies with more than £500 million revenues to disclose by 2022 in line with the four overarching pillars of the TCFD recommendations, encompassing GovernanceGovernance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. More, Strategy, Risk Management, Metrics & Targets.
The consultation is open until May 5, 2021.
In the consultation’s forward, Minister of State for Business, Energy and Clean Growth Anne-Marie Trevelyan, and Minister for Climate Change and Corporate Responsibility Lord Callanan wrote:
“High-quality disclosure on how organisations will manage the material financial risks and opportunities arising from climate change will improve transparency and encourage more informed pricing and capital allocation. Over time, these climate-related financial disclosures will support investment decisions aligned with our transition to net zero, and the increased transparency such disclosures provide will influence the behaviours of companies and their stakeholders. This move will support investment in green technologies, services and infrastructure, and help to mobilise billions in private investment as set out in the Prime Minister’s Ten Point Plan.”
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