The UK government has announced plans to require UK financial institutions and listed companies – including (re)insurers – to publish net zero transition plans that detail how they will adapt and decarbonise as the UK moves towards a net zero economy by 2050.
Firms will have to set out detailed public plans for how they will move to a low-carbon future by 2023.
To guard against greenwashing, a science-based ‘gold standard’ for transition plans will be drawn up by a new Transition Plan Taskforce, composed of industry and academic leaders, regulators, and civil society groups.
The new rules form part of a package of new measures announced by HM Treasury and UK chancellor Rishi Sunak at the Finance Day at COP26 on Wednesday.
Sunak said the “historic” climate commitments cover private companies covering $130trn of financial assets and would allow the UK to become the world’s first net zero aligned financial centre.
The chancellor told the COP26 in Glasgow that around 40 percent of the world’s financial assets is now being aligned with the climate goals in the Paris Agreement, including limiting global warming to 1.5C.
These commitments come from over 450 firms from all parts of the financial industry, based in 45 countries across six continents, and have been delivered through the Glasgow Financial Alliance for Net Zero (GFANZ).
In total, the UK will spend £576mn on a package of initiatives to mobilise finance into emerging markets and developing economies, including £66mn to expand the UK’s MOBILIST programme, which helps to develop new investment products which can be listed on public markets and attract different types of investors.
The move is the latest mandatory requirement to come from HM Treasury during the COP26 climate talks.
Earlier this week HM Treasury confirmed it will make it mandatory for large companies – including (re)insurance firms and intermediaries – to disclose on climate-related risks from April 2022, becoming the first G20 nation to enshrine climate reporting into law.
New legislation will force firms to disclose their climate-related risks and opportunities, in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.
The new legislation follows the publication of UK’s landmark Net Zero Strategy last week and forms part of the government’s commitment to making the UK financial system net zero by 2050.
Christopher Croft, CEO of broker body LIIBA, said the insurance industry, and broker in particular, have a “key role” to play in “helping businesses transition to net zero because of their unique position in the economy.
“Brokers understand balance sheet risk, are involved in huge infrastructure projects, international transportation networks and they’ve developed a detailed world-leading understanding of climate risk. Their role in achieving this change will be critical.”
In June, LIIBA published its policy paper Our Role in Net Zero, which made the case that London’s specialist brokers, working closely with insurers, possess a unique combination of skills and expertise that will enable businesses to make the changes necessary to achieve the net reduction in carbon emissions.
“LIIBA members share the UK government’s sense of urgency in this matter. London market brokers are at the forefront of the drive to achieve net zero by 2050, both in terms of their clients and their own organisations.”