The U.K. will be the first country to require large companies, financial institutions and regulated pension funds to disclose the impacts of climate change by 2025, Chancellor of the Exchequer Rishi Sunak said Monday.
The move was part of several steps announced to position the U.K. "at the forefront of green finance," Mr. Sunak said.
"Going further than recommended by the Task Force on Climate-related Financial Disclosures. And the first G-20 country to do so," Mr. Sunak said in a tweet.
The upcoming rules "will capture a significant portion of the economy including listed commercial companies, UK-registered large private companies, banks, building societies, insurance companies, UK-authorised asset managers, life insurers, FCA-regulated pension schemes and occupational pension schemes," a government white paper said. The enhanced climate disclosure standards are aimed at helping businesses and investors understand the material financial impacts of their exposure to climate change and price climate-related risks more accurately, while supporting U.K. efforts to green its economy, Mr. Sunak's office said.
As part of efforts to reach its own 2050 net-zero carbon emissions target, the British government also plans to issue its first sovereign green bond in 2021, subject to market conditions, with plans to do more based on investor demand. The bonds will help finance projects to tackle climate change and infrastructure investment, and create green jobs.
A significant portion of the mandatory disclosure requirements will be in place by 2023, the HM Treasury white paper said. On Monday, a joint Government Regulator TCFD Taskforce published an interim report and road map to help companies comply with the new disclosure mandat
The U.K. will also implement a green taxonomy to help improve understanding of the environmental impact of firms' activities and investments.
Trysha Daskam, head of ESG strategy at Silver Regulatory Associates, a compliance consultant for investment firms, said in an email that with the new disclosure requirements expected to apply widely across the U.K. economy, "investment managers with allocations from pension funds implicated by the reporting requirements should expect requests to provide portfolio-level climate data to facilitate reporting. The U.K.'s mounting focus on climate might reasonably be interpreted as a signal to investment managers that climate-related disclosures will be directly required in the short-term."
In April, the U.K.'s Department for Work and Pensions issued non-statutory guidance for trustees of occupational pension funds to manage and report climate-related risks in line with the TCFD recommendations.