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British publicly listed companies and pension funds may have to publish, by 2022, what risks their businesses face from climate change under a new so-called green finance strategy.
Britain has become the first G7 country to sign into law a requirement to reach net zero emissions by 2050, Reuters reported. It has also published its green finance strategy, which sets out plans to increase investment in sustainable projects and infrastructure.
The government paper builds on disclosure of climate risk plans set out by the G20 Task Force on Climate-related Financial Disclosures. It states the financial sector needs to be at the heart of changes required to meet the net zero emissions goal.
“The re-allocation of tens of trillions of dollars of capital toward green investment offers the potential to reshape cities, energy systems and land use around the world. The nature of this investment ... will determine the future of our climate,” the report said. “This includes setting expectations for publicly listed companies and large asset owners to disclose, by 2022, how climate change risk impacts their activities.”
The publication noted the UK government said it would work with regulators to decide whether mandatory disclosures, rather than the current voluntary system, was needed.
The climate risks include potential “stranded assets” of fossil fuel companies which may not be able to burn all their oil, gas or coal resources if carbon emissions are limited. Insurance companies have also reportedly warned of the risk of claims relating to increased extreme weather damage from floods or hurricanes.
Reuters reported many investors have called on companies to provide better communication on how climate change could impact their businesses, amid concerns that assets are being mispriced because the full scale of the risk is not being factored in.
The G20’s Task Force on Climate-related Financial Disclosures launched its voluntary framework in 2017. It calls on companies to provide climate-related financial disclosures in their public annual financial filings. Companies supporting it include insurance groups AXA (AXAF.PA) and Aviva (AV.L), oil companies Royal Dutch Shell (RDSa.L) and Total (TOTF.PA) and mining companies Anglo American (AAL.L) and BHP (BHP.AX).
