U.K. looks to become a net-zero-aligned financial center

The U.K. hopes to become the world's first net-zero-aligned financial center, in part by making companies show their net-zero transition plans.

Speaking at COP26's Finance Day on Wednesday, Rishi Sunak, chancellor of the exchequer, unveiled a set of proposals to decarbonize the economy, including requiring U.K. financial institutions and public companies to detail their transition plans for reaching a net-zero economy by 2050.

To guard against greenwashing, a science-based "gold standard" for transition plans will be drawn up by a new Transition Plan Taskforce of industry and academic leaders, regulators and other groups to help create standards.

Mr. Sunak called on financial firms to "mobilize private finance quickly and at scale," and for governments to enact climate policies that enable that mobilization.

The U.K. will target $100 billion toward climate finance by 2023 and urged developed countries to boost their support to developing countries.

The U.K. will try to help developing countries with a series of green initiatives.

Fiona Reynolds, CEO, Principles for Responsible Investment, said in an emailed statement that the requirement for U.K. firms to show how they will transition to net zero by 2050 "is core in delivering the transparency needed to ensure firms meet their net-zero targets in time to keep warming below the 1.5C threshold.

"A robust regulatory framework is a clear requirement for success here — firms must have the ability to report on targets and progress towards them through a strong regulatory system which delivers both visibility and accountability. Today's announcement should not be viewed as 'job done' for responsible finance in the U.K., but rather should provide the foundations for further integration of vital climate-focused measures into the marketplace," Ms. Reynolds added.

Anne Simpson, managing investment director for board governance and sustainability at the $489.9 billion California Public Employees' Retirement System, Sacramento, and chairwoman of Climate Action 100+, a $55 trillion alliance of global investors, called the U.K. plan "a good start."

"But we need more, for (capital expenditures), accounting and auditing and issues like political lobbying and executive compensation to be aligned to make it work," Ms. Simpson said in an interview.

She noted that Climate Action 100+ "has a net-zero company benchmark which sets this out in a practical form."