Wednesday, 20 October 2021
On Monday (18 October 2021), Britain's Finance Minister Rishi Sunak said that asset managers, pension schemes and some large companies will need to start disclosing their environmental impacts under the UK's newly planned Sustainability Disclosure Requirements.
The report, entitled Greening Finance: A Roadmap to Sustainable Investing, outlines the legislative and regulatory changes that will be made across the economy to arm investors and consumers with the right information by setting 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 implementing mandatory reporting aligned with the Task Force on Climate-Related Financial Disclosures (TCFD). This includes requiring every investment product to set out 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 also 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 could be considered as being green. Relevant companies and financial products will be required to report their environmental impact against the UK Green Taxonomy.
The Roadmap also acts as a call to action for the pension and investment sectors, 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.
Following the publication of a new report setting out further details of how SDRs will work, Rishi Sunak, Chancellor of the Exchequer (Finance Minister) said:
We are already a world leader in green finance, and today’s 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