New rules will require large UK firms to report their environmental impact under the guidance of the chancellor.
This applies to both investment products as well as pension schemes.
This is in advance of the November COP26 conference in Glasgow where leaders from around the world will be discussing their climate commitments.
Experts believe that the UK hosting this event is currently not on track to achieve its emissions goals.
Boris Johnson pledged to reduce emissions by 78% in 2035, as compared to 1990 levels.
Treasury stated that the new sustainability disclosure requirements will mean investments products must now report the environmental effects of activities it funds.
Additionally, sustainability claims must be supported “clearly” and net zero transition plans clearly defined.
This is meant to stop “greenwashing”, which involves misleading statements made by companies about their environmental obligations.
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However, the government stated that the information would only be “impactful” if it is actually used by customers or investors.
Rishi Sunak, Chancellor of India stated that sustainability should be considered a major component in investment decisions. Our plans will equip investors with the information they need to take more eco-friendly decisions.
According to him, the new rules would “set global sustainability standards that will increase the economy and protect the earth. They will also support our net zero goals.”
The exact date and consequences for firms who do not follow the regulations are unknown. After a public meeting, details of specific reporting requirements will be made.
SDRs were first discussed by Sunak in July. He has now announced the next steps for meeting the requirements: “Greening finance: A Roadmap towards Sustainable Investing”.
Sam Alvis of the Green Alliance think-tank said it was a positive step toward greening private sector.
It is important to prevent money being diverted into harmful investment. He said that the chancellor has an opportunity to use the same public spending rules in the upcoming spending review.
Rain Newton-Smith is the chief economist of Confederation of British Industry. He stated that greater transparency on environmental impacts will help investors funnel finance to projects aligned with net zero targets, and reduce our nation’s carbon emissions.
Heather McKay of E3G said that to change the way companies operate, the government needs to be clear about the “what is environmentally friendly” and the “what isn’t”.
She stated that this was a necessary step in the fight against greenwashing.
Jessica Fries (chair of Accounting for Sustainability) stated that without the correct information, investors and pension funds made “incorrect” decisions.
Ms Fries said, “As the global center of finance it is important that our recommendations correspond with emerging needs globally.”
Boris Johnson’s government currently has a target to cut just a fifth of UK’s emissions by 2035, as compared to levels in the 1990s, says a team of experts who advises him.
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