Calls for Mandatory Reporting on Climate Change Risks
A new report from Parliament’s Environmental Audit Committee has called on the Government to make it mandatory for large companies and asset owners—such as pension funds—to report their exposure to climate change risks and opportunities by 2022.
The report found that structural incentives across the UK investment chain encourage a focus on short-term returns, often to the neglect of longer-term considerations – including environmental sustainability and climate change-related risks and opportunities.
The Committee notes that although the Government has endorsed international recommendations on climate-related financial disclosures and says it has 'encouraged publicly-listed companies' to implement them, no specific action appears to have been taken on this.
According to the report, the UK’s existing framework of financial law and governance could and should be used to implement climate-related risk reporting. It calls on the Government to issue guidance immediately to make it clear that the Companies Act 2006 already requires companies to disclose climate change risks where they are financially material.
"We need to fix the incentives in our financial system that encourage short term thinking. Long-term sustainability must be factored into financial decision making,” explained Mary Creagh MP, Chair of the Environmental Audit Committee. “Climate change poses financial risks to a range of investments – from food and farming, to infrastructure, construction and insurance liability. The low-carbon transition also presents exciting opportunities in clean energy, transport and tech that could benefit UK businesses.”
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Contains Parliamentary information licensed under the Open Parliament Licence v3.0.