The UK Government has 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.
The UK’s Department for Business, Energy & Industrial Strategy and HM Treasury said new legislation would force firms to disclose their climate-related risks and opportunities, in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.
From 6 April 6 2022, over 1,300 of the biggest UK-registered companies and financial institutions will be required to apply the TCFD recommendations.
This will include many of the UK’s largest traded companies, banks and insurers, as well as private companies with over 500 employees and £500mn ($683.1mn) in turnover.
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.
Treasury said the move will ensure businesses consider the risks they face as a result of climate change and will encourage boards to set out their emission reduction plans and sustainability credentials.
The ministry added that the new rules will put the government on track to achieve its ambition of the UK becoming the first G20 country to mandate TCFD-aligned climate disclosures across the economy – as set out by the Chancellor of the Exchequer in November 2020.
Economic Secretary to the Treasury John Glen said the TCFD requirements will not only help tackle greenwashing but also enable investors and businesses to align their long-term strategies with the UK’s net zero commitments.
“We are already world leaders in green finance, having recently launched the UK’s first Green Savings Bond and raised £16bn for green projects through our Green Gilts.”
The TCFD is an industry-led group designed to help investors understand their financial exposure to climate risk and works with companies to disclose this information in a clear and consistent way.
It was launched at the Paris COP21 in 2015 by the Financial Stability Board (FSB) and Mark Carney, the UN Special Envoy on Climate Action and Finance and UK Finance Adviser for COP26.
Energy and Climate Change Minister Greg Hands said: “If the UK is to meet our ambitious net-zero commitments by 2050, we need our thriving financial system, including our largest businesses and investors, to put climate change at the heart of their activities and decision making.
“By mandating large businesses to disclose their climate risks and opportunities – the first G20 country to do so – we are showing global leadership by making our financial system the greenest in the world.”