London — The UK government is considering mandatory climate risk disclosure for listed companies and large asset owners, according to its Green Finance Strategy released Tuesday.
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The moves comes as the government seeks to harness the power of the City of London to drive investment in sustainable companies, as part of a wider goal to develop a low-carbon economy by mid-century.
The potential for mandatory climate risk reporting suggests availability of finance could become more constrained for higher-risk companies and projects, as greater transparency makes climate risks clearer for investors, while at the same time increasing finance for sustainable investments.
"As the world looks to shift to clean, resilient and sustainable economic growth, there is an opportunity to make London the go-to hub for green investment," City Minister John Glen was expected to say Tuesday at a finance summit in London, according to a joint statement from his office and the Treasury.
The government's strategy sets out plans to increase investment in sustainable projects and infrastructure, while ensuring the UK remains on track to meets its recently-agreed 2050 net zero emissions target ?- the first major economy to do so.
It also builds on findings from the Financial Stability Board?s Task Force on Climate-related Financial Disclosures, led by former New York Mayor Michael Bloomberg and Bank of England governor Mark Carney.
In his former role as chair of the FSB, Carney has previously warned that climate change poses a systemic risk for the global financial system, particularly if a re-pricing of assets occurred over a rapid timeframe.
DISCLOSURE FROM 2022
The government's strategy "includes setting expectations for publicly listed companies and large asset owners to disclose by 2022 how climate change risk impacts their activities," the government said in Tuesday's statement.
"Work with regulators will explore the most effective way of doing this, including whether mandatory disclosures are necessary," it said.
While 70% of UK banks now consider climate change a financial risk, only 10% are taking long-term action to manage those risks, the government warned.
The government's strategy also aims to clarify the need for financial regulators to have regard for climate change when advancing their objectives and discharging their functions ?- including the Prudential Regulation Authority, Financial Conduct Authority and Financial Policy Committee.
It also includes the launch of the Green Finance Education Charter to make sure financial services-related qualifications and certificates include developing practitioners? knowledge and understanding of green finance.
The government will play a leading role in green finance through GBP5.8 billion ($7.3 billion) of climate finance, encouraging other countries to do more through forums like the UN?s Climate Action Summit, working with the private sector on financial principles for phasing out coal-fired electricity generation, and ensuring the UK?s aid spending is aligned with the objectives of the Paris Agreement, it said.