Our thinking

Policy progress

14 May, 2021

The finance industry is one of the most powerful levers we have for accelerating action on the climate crisis and influencing business decisions. But to be able to use this influence for good, investors need access to high-quality data from companies on their climate risk and impact – something that is often lacking.

We were therefore heartened to see the UK Government’s Department for Business, Energy & Industrial Strategy (BEIS) launch a consultation into climate-related financial disclosure, which will make it mandatory for listed companies to report in line with the requirements of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations by 2022.

Although support for voluntary TCFD reporting has been largely positive, the uptake and quality of disclosure has been low. Putting this into policy will require listed companies to disclose their impact on climate change, as well as their exposure to its impacts, through the four pillars of governance, strategy, risk management, and metrics and targets.

This will give a comprehensive view of a company’s approach to managing climate change. However, there have been calls for the legislation to go further to ensure that the companies with the biggest impacts are included, and for all reporters to be required to report all indirect emissions, which tend to account for the vast majority of emissions.

We support these calls: a framework to deliver robust and practicable information must be comprehensive. Whether or not these suggestions are taken into account remains to be seen, but we look forward to the next phase of helping both investors to make more informed decisions and businesses to better understand their impact and exposure.

By Patrick Bapty