Rishi Sunak, U.K. chancellor of the exchequer, unveiled sustainability disclosure requirements for pension funds, asset managers and other businesses on Monday.
The new requirements are aimed at preventing greenwashing and giving investors more information about how investments align with net-zero ambitions. Details on specific reporting requirements, scope and timing will be developed after a public consultation.
An accompanying report, Greening Finance: A Roadmap to Sustainable Investing, explains how the disclosure requirements will work, and outlines further legislative and regulatory changes planned to standardize environmental sustainability reporting.
The report also sets expectations that the pensions and investments sector will use the information generated by the reporting rules to start shifting financial flows to align with a net-zero economy.
"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," Mr. Sunak said in a statement issued with the report.
Diandra Soobiah, head of responsible investment for the £20.9 billion ($28.7 billion) U.K. defined contribution multiemployer plan National Employment Savings Trust, London, said in an email that the new standards should make sustainable investing easier.
"Public disclosure of the environmental impact of investments will help us as investors make better decisions about the companies and initiatives we invest in," Ms. Soobiah said. "It will be easier to understand sustainability-related risks as well as the opportunities which exist and improve accountability at every stage of the investment chain."
David Fairs, executive director of regulatory policy, analysis and advice for The Pensions Regulator, in a separate statement welcomed the new reporting requirements.
"A warming world, loss of biodiversity and depletion of the natural environment all have the potential to worsen retirements through supply disruption, loss of assets or weakening an employer's ability to support pension scheme funding," Mr. Fairs said. "A shift to sustainable investment and a net-zero economy can also provide opportunities trustees must also be alert to. The pensions industry must understand this issue is real and urgent."
Claire Jones, head of responsible investment for pension consultant Lane Clark & Peacock said in a separate statement that the road map "provides welcome clarity on these plans and how they fit together."
But she added that "with many investments being international, improved sustainability disclosures by U.K. companies will only provide a small part of the information they need to help them achieve their goals. For this to be effective, there does need to be international rule harmonization. The government recognizes that it needs to seek faster global action on this."
Dan Mikulskis, investment partner at LCP, said in an emailed statement that for asset managers, "we don't think these rules will be game-changing."
"Right now, we see huge gaps between managers' sustainability practices, particularly in stewardship, and we think this could be one of the most impactful areas if standards are improved," Mr. Mikulskis said. "Investors will have to continue to do independent research into investment manager practices while there are these huge gaps in standards. Asset managers also need to better explain their thinking on climate change.
"This goes well beyond simply disclosing data and box-ticking to meet regulatory requirements and involves helping clients understand how they should think about climate change, while providing data that can be effectively consolidated across a portfolio."
