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UK government roadmap on greening finance and sustainable investing: Impact for companies

  • United Kingdom
  • Corporate
  • ESG - ESG Corporate

21-10-2021

On 18 October 2021, the UK government published a policy paper - Greening Finance: A Roadmap to Sustainable Investing.

The Roadmap sets out the government’s ambition to ‘green’ the UK financial system and align it with the UK’s net zero commitment. The government intends that this will happen in three phases. The Roadmap covers the first of the three phases proposed by the government – ie ensuring that the information exists to enable every financial decision to factor in climate change and the environment.

This update highlights the impact for UK companies. A separate briefing from our Financial Services team will examine the broader implications of the Roadmap for asset managers, asset owners and in relation to investment products.

What does the Roadmap mean for companies?

Companies in scope will be subject to new Sustainability Disclosure Requirements (SDRs) announced by the Chancellor in the Mansion House speech in July 2021. SDR builds on the UK’s implementation of the Task Force on Climate-related Financial Disclosure (TCFD) recommendations. The measures set out in the Roadmap are intended, amongst other things, to streamline the government’s stated intention to make TCFD-aligned disclosures mandatory by 2025. In addition to corporate disclosure, the SDRs will use the same framework and metrics across the economy and will also apply to asset managers and asset owners and investment products.

Corporate disclosures are likely to include standards for sustainability, which will be developed by the International Sustainability Standards Board (ISSB). The government expects that the ISSB will build on the four pillars of the TCFD recommendations. – ie Strategy, Governance, Risk Management, and Metrics and Targets. Companies will also have to explain the level of alignment of their activities with a UK Green Taxonomy (discussed further at Chapter 2 of the Roadmap). The UK Green Taxonomy will set out the criteria which specific economic activities must meet to be considered environmentally sustainable, and appears similar to the EU taxonomy.

UK listed companies and certain other UK-registered companies, including financial services firms, will be subject to the disclosure requirements (see further below). Disclosures will be made in the Annual Report. The scope and timing of the requirements and the reporting detail are not set out in the Roadmap, and will be determined following consultation during 2022.

Next steps

In terms of the timeframe for implementation, the Roadmap indicates that:

• Subject to Parliamentary approval, certain financial companies will be subject to requirements to make TCFD disclosures by 2022.

• Mandatory disclosure requirements in the Annual Report incorporating the UK Green Taxonomy and ISSB-issued standards for the “most economically significant” UK companies will be in place within 1 – 2 years after Royal Assent of the primary legislation, with voluntary disclosure for other UK companies.

• For UK listed companies (already required or to be required under the Listing Rules to make TCFD-aligned disclosures on a “company or explain” basis), there will be a consultation within the above timeframe on requiring the same mandatory disclosures as set out above.

• Subject to consultation, all UK companies will be subject to mandatory disclosures incorporating the UK Green Taxonomy and ISSB-issued standards within 2 – 3 years after the primary legislation receives Royal Assent.

Our ESG solutions team can help companies to prepare for TCFD and sustainability disclosures. Please click here to access our ESG brochure which sets out what we are doing with clients to help them.

Useful links

Policy Paper - Greening Finance: A Roadmap to Sustainable Investment

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