The United Kingdom is pushing ahead with legislation that will force more than 1,300 of its largest companies to disclose climate risks.
Announcing the move ahead of the COP26 climate talks that start in Glasgow on Sunday, the UK government said it plans to be the first major economy to require corporations to report climate-related risks and opportunities.
The proposed law will apply to many of the largest traded companies on the London Stock Exchange, banks and insurers, as well as private companies with more than 500 employees and £500 million ($690 million) in sales.
The regulation will become law in April 2022 pending approval by Parliament. G20 countries have agreed to corporate reporting standards as part of the Task Force on Climate-related Financial Disclosures (TCFD) framework, but the United Kingdom wants to be first enshrine them in law.
In a statement on Friday, the UK government said the move “will help investors and businesses to better understand the financial impacts of their exposure to climate change, and price climate-related risks more accurately, while supporting the greening of the UK economy.”
Business minister Greg Hands said the country’s largest businesses will be “in the best position in the world” to manage climate-related risks and take advantage of opportunities presented by Britain’s transition to net zero carbon emissions.
John Glen, economic secretary to the Treasury, said the requirement would help tackle greenwashing — the practice of giving false impressions about a company’s climate credentials -— and enable investors and businesses to operate within the bounds of the country’s net zero commitments.
Business groups, including the Confederation of British Industry and the Investment Association, hailed the disclosure rules.
James Alexander, chief executive of the UK Sustainable Investment and Finance Association said it was positive to see a requirement for scenario analysis appearing in the final regulations. Scenario analysis is a predictive tool that can be used to model climate risk.
“This is necessary to ensure companies can provide to investors and savers a clearer and more meaningful picture of climate risks and the opportunities to support the transition in their annual report and accounts,” he said.