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Green finance roadmap sets out government’s sustainability expectations

Author: ICAEW Insights

Published: 19 Oct 2021

HM Treasury has published its roadmap for the transition to a greener financial system. Importantly for the accountancy profession, it sets out plans for implementing sustainability disclosures.

Large businesses must report on their green credentials to the investment community, says the UK Chancellor. With a whole chapter on getting the right information to market participants, ‘Greening Finance: A Roadmap to Sustainable Investing’ focuses on ensuring the UK’s ambitious climate-change targets are not only written into law, but the financial system that will support the transition is equipped to play its part.

The roadmap sets out more details on sustainability disclosure requirements that will help businesses prepare for what they will have to report and by when and delivers more detail on the proposed UK Green Taxonomy. It also highlights the importance of investor stewardship in green finance and sets out the government’s expectations. Finally, it reiterates the UK's commitment to international leadership on green finance

Greening the financial system can be seen in three phases. The roadmap represents the first phase (informing investors and consumers). Two further phases are to come: acting on the information, and then shifting financial flows.

Steps to strengthen sustainability reporting

Welcoming the publication of the roadmap, ICAEW’s CEO Michael Izza commented he was pleased the government has set out steps to strengthen sustainability reporting. 

“It’s vital that investors and other users of accounts can make informed decisions about the businesses they fund,” he said. “These plans will help the UK develop an integrated, robust and internationally-aligned legislative framework for sustainability reporting and help as we work towards the Chancellor’s goal of mandatory TCFD-aligned disclosures by 2025.”

The Chancellor reminds us that in November 2020, the UK became the first country to commit to making climate-risk disclosures mandatory across the economy, in September 2021, the UK Government raised £10bn for green projects through the sale of the first green gilt, and this roadmap aims to ensure businesses are fully informed of the environmental risks they face and create. The key aim is that UK businesses are up to withstanding those risks and can benefit from the net zero transition.

Get to grips with new disclosures regime ‘sooner rather than later’

Importantly for the accountancy profession, the roadmap sets out plans for implementing sustainability disclosure requirements that will take forward the government’s commitment to a sustainable financial system. They will require publication of information relating to sustainability-related risks, opportunities, and impacts. The new requirements will also apply to pension schemes, investment products and asset managers and owners.

Sarah Dunn, ICAEW Technical Manager Financial Reporting, says: “At a practical level, businesses and their advisers will need to get to grips sooner rather than later with the implications of any new disclosures regime, including any need for training and upskilling of people across the organisation.”

The roadmap outlines the legislative and regulatory changes that will need to be made across the economy to arm investors and consumers with the right information by setting world-leading standards on environmental sustainability reporting.

Richard Spencer, ICAEW’s Director of Sustainability, added: “For me, the important thing here is that this framework will go beyond the scope of the International Sustainability Standards Board and any standards it sets on sustainability. First, its scope is on all sustainability so includes social issues. Secondly, it reaches beyond information that is material to investors and will require reporting entities to include their impacts on the environment and (less clearly) on society. While this isn’t much of an issue when it comes to climate, because the focus is already on impact (emissions) but is going to be a much bigger deal when it comes to biodiversity, for example.”

For further information on non-financial reporting requirement see icaew.com/nfr

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