All listed companies in Britain will have to produce a strategy to reduce their carbon emissions or face fines in plans to be unveiled by Rishi Sunak today.
In moves to make the UK the first carbon neutral financial centre, firms, investors and banks will be required to detail how they will move towards becoming net zero by 2050.
Ministers are to set up a task force, under the control of the Financial Conduct Authority, that will set the standards under which companies are required to report. They said this would stop firms “greenwashing” and making pledges that could not be verified.
Treasury sources said that most companies and investment firms based in the UK would have to produce plans laying out a pathway to reducing their emissions to net zero by 2050 — in alignment with that of the government.
Certain firms, such as London-listed international mining companies, could be given exemptions from fully reaching net zero under the scheme.
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They added that it would be impractical to ask a minority of firms, such as those mining minerals for batteries, to reach net zero but the rules would apply to the majority of listed companies.
Today is finance day at the climate conference in Glasgow. Sunak is also scheduled to announce that 450 global firms and financial institutions — with $130 trillion or 40 per cent of the world’s financial assets — have committed to aligning with the Paris climate goals including limiting global warming to 1.5C above pre-industrial levels.
Sunak said: “Harnessing the trillions of dollars controlled by these companies in the fight against climate change is crucial so I’ve also announced new requirements for firms to publish their net zero transition plans.
“Together we can provide the cash the world needs to stop catastrophic climate change.”
Under the new financial net zero reporting scheme all companies will be required by 2023 to set out detailed public plans to reduce their reliance on fossil fuels with milestones to reach net zero by 2050.
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The performance of companies will be measured by the Financial Conduct Authority, which is expected to have the power to fine those that do not produce plans or deliver on their pledges.
Mark Carney, former governor of the Bank of England, who will appear alongside Sunak outlining the initiative, today said that companies will have to be completely transparent about their plans.
Carney told Radio 4’s Today programme: “They have to report every year what their emissions are? What the emissions of their clients are?
“How much those emissions have gone down? What bad assets, whether it’s coal or gas or others, that they’ve retired? And what’s their pathway to net zero?”
In the past the authority has fined large banks millions of pounds for failure to comply with financial standards but Treasury sources said the aim initially was to use the new powers to cajole companies into taking action rather than adopting a heavy-handed approach. They added that they did not want companies moving out of London to avoid the new rules which they hope will be followed by other large financial centres, such as the US.
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Kay Swinburne, the vice chairwoman of financial services at the accountancy firm KPMG, said the announcement would provide the financial services industry with “a valuable set of unified metrics to measure progress towards decarbonisation”.
She added that it was “brave to put a gold standard in place for all companies raising funding”.
Dr Rhian-Mari Thomas, the chief executive at the Green Finance Institute, said Sunak’s move would mark the day that green finance had “reached a point of critical momentum”.
“The task before us now is to come together in radical collaboration to unlock investment opportunities at speed and scale so we can channel this wall of capital into real economy outcomes that not only positions the UK as the world’s first net zero financial centre but also delivers a just and resilient net-zero global economy.”
