The Green Finance Strategy will require firms and large asset holders to disclose impact of climate change on their business operations

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The UK government has launched its Green Finance Strategy today which will ask publicly-listed firms and large asset owners to disclose how climate change risk impacts their business by 2022.

The initiative is an effort to place the country’s financial services industry and the City of London “at the heart of efforts to tackle climate change” and to achieve its carbon emissions targets.

Last month, Prime Minister Theresa May enshrined into law the UK’s commitment to achieving net zero emissions by 2050, making Britain the first G7 country to legislate for long-term climate targets.

The Green Finance Strategy aims to boost investment into sustainable business projects and infrastructure, as well as improve engagement and awareness of green finance across the industry.

City Minister John Glen MP said: “The City has a vital role to play in securing a greener future for us all.

“By investing more in sustainable projects it can not only protect our environment, but also help establish London as the pre-eminent international centre for green finance.

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John Glen MP (Credit: UK Parliament)

“Today’s Green Finance Strategy will support this ambition, with new initiatives to boost funding for green ventures and ensure the environment is at the centre of all financial decision-making.”


Green Finance Strategy will require firms to disclose impact of climate change

A key takeaway of the announcement was that publicly-listed companies and large asset holders like pension funds will be expected to disclose by 2022 the impact of climate change on their business operations.

Making this reporting mandatory has not been ruled out by the Treasury, with regulators to be consulted on the “most effective” ways to enforce the disclosures.

Stephen Jones, CEO of trade association UK Finance, said: “As an industry we stand ready to play our part in tackling climate change and achieving net zero carbon emissions by 2050.

“We also support the intention that publicly-listed companies and large asset companies disclose by 2022 the impact of climate change on their activities.

“This builds naturally on the recommendations of the Financial Stability Board-sponsored Taskforce on Climate-related Financial Disclosures (TCFD) that many of the largest companies, within financial services and beyond, are now embedding in their governance, strategy and risk management.”

The Bank of England has recently increased its public discussions around environmental issues, while governor Mark Carney told City leaders last month the central bank will soon begin stress testing the UK economy to understand its ability to cope with climate change.


Green Finance Strategy introduces a range of initiatives to meet climate change challenges

Other highlights of the Green Finance Strategy include the creation of a Green Finance Institute in London to foster cooperation between public and private sectors and environmentally-sound investment opportunities.

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The City of London (Credit: Matheus Swanson/Flickr)

A £5m ($6.2m) fund to develop green mortgage schemes has also been introduced, as well as an “education charter” to make green finance a more central part of financial services training and qualifications.

Chairwoman of the Environment Agency governmental body Emma Howard Boyd said: “I’m delighted to see the launch of the Green Finance Strategy and we look forward to working closely with the Green Finance Institute to further its aims, particularly on climate resilience.

“The joint working group with regulators on climate-related financial disclosure will drive businesses to do more by ensuring investors take better account of climate risks.

“The World Economic Forum’s Global Risks Report ranks extreme weather events as number one.

“This presents a massive investment opportunity in technology, infrastructure, and expertise to protect people and businesses.”


Green Finance Strategy comes amid public pressure for financial services to tackle climate change issues

Environmental concerns about the financial services industry have bubbled to the surface of public discourse in recent months, with Extinction Rebellion protestors targeting London’s financial district earlier in the year, and Greenpeace activists disrupting Chancellor Philip Hammond’s Mansion House speech last month.

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Protesters target London Stock Exchange in a day of activism against financial institutions (Credit: Extinction Rebellion/TheLightscaper)

Fran Boait, executive director of campaign group Positive Money, said: “With a small window of time to decarbonise the economy, there is a need to rapidly shift lending and investment out of risky fossil fuels.

“Ensuring that all companies publish consistent and comprehensive information about their climate risk is a crucial first step, and it is extremely timely that the government’s Green Finance strategy includes a commitment to require universal climate risk disclosure by 2022.

“The government and Bank of England must now go further, by introducing measures to actively penalise high-carbon lending.

“The climate emergency is too urgent to rely on market forces alone, and only tougher regulation will stem the flow of finance to dirty energy before it’s too late.”