New UK Government reveals plans to green economy
Chancellor Rachel Reeves made a raft of announcements on Thursday, including on taxonomy, carbon credits and corporate sustainability disclosures
The UK Government will push ahead with plans to make large companies reporting on sustainability topics and implement climate transition plans, it confirmed this week.
Chancellor of the Exchequer Rachel Reeves gave her inaugural speech at Mansion House on Thursday, laying out her vision for the country’s economy and financial sector.
A chunk of her comments related to sustainable finance and corporate decarbonisation, including a commitment to consult on making large companies disclose against UK Sustainability Reporting Standards, which are likely to be a slightly-tweaked version of those already developed by the International Sustainability Standards Board (ISSB).
The government appointed a UK Sustainability Disclosure Technical Advisory Committee in May, to assess whether the ISSB’s standards are suitable for adoption and advise on any UK-specific alterations and timeframes.
It will publish its opinion in the first half of 2025, paving the way for a formal government endorsement. Once that’s happened, the Financial Conduct Authority will move forward on its plans to require UK-listed companies to disclose in line with specific UK standards.
The Companies Act may also be revised to include the requirement to address non-listed companies.
Climate transition plans and finance
Reeves also announced plans to consult on the introduction of transition plan requirements.
Labour promised to “mandate UK-regulated financial institutions, including banks, asset managers, pension funds and insurers, and FTSE100 companies, to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement” during its election campaign earlier this year.
While the previous government focused on transparency, via reporting rules, if the new government fulfils its manifesto pledge to require the plans to be implemented, too, it will bring the UK further in line with the EU, whose new Corporate Sustainability Due Diligence Directive contains similar expectations.
The UK consultation will be launched in the first half of 2025.
The government will team up with the City of London Corporation to form a ‘transition finance council’ – one of the recommendations made recently by UK’s Transition Finance Market Review.
A tepid approach to a UK Taxonomy
This week’s announcements also included the launch of a consultation on the UK taxonomy, but it isn’t as bullish as some had hoped.
The taxonomy has been under development for years, and was originally supposed to offer companies and investors an equivalent to the EU’s flagship framework.
However, the previous government kicked it into the long grass, in part in response to companies complaining about growing disclosure requirement, and because the process hasn’t gone well for the EU.
Rather than doubling down on the UK’s original commitment, the new government want to “learn the lessons” of other taxonomies, it said.
Specifically, it wants to know “whether a UK Taxonomy would be additional and complementary to existing policies in meeting the objectives of mitigating greenwashing and channeling capital in support of the government’s sustainability objectives”.
The consultation is open until February 6th.
Carbon and nature offsets
A day after Reeves gave her Mansion House speech, the government published a policy paper on improving the integrity of the market for voluntarily trading carbon and nature credits
The six principles identified in the report include the need for additionality, credible baselines and accounting, and robust verification.
Yet again, there will be a consultation early next year to work out how the principles can be implemented and enforced.