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Climate change and asset management: UK Government aims to be a "world-leader in the use of green finance"

The Chancellor, Rishi Sunak, delivered a statement to Parliament earlier this week, setting out the Government’s plans to renew the UK’s position as the world’s preeminent financial centre following Brexit. Significantly, the Chancellor highlighted a number of climate change-related measures.

  1. Climate-related disclosures: the Government plans to require mandatory climate disclosures by large companies and financial institutions (including all UK authorised asset managers) by 2025. In doing so, the UK will go further than the recommendations of the Taskforce on Climate-related Financial Disclosures and will become the first G20 country to require mandatory compliance with those recommendations.
  2. Green taxonomy: the statement set out the Government’s desire for the UK to become a "world-leader in the use of green finance". In order to meet this objective, a new "green taxonomy" will be implemented to define what "green" means so that financial firms and investors can better understand the impact of investments on the environment.
  3. Green investing: to encourage investment in "green" investments, the UK will issue its first ever Sovereign Green Bond in 2021. There will be a series of issuances, as the Government looks to build out a "green curve" over the coming years to help fund projects tackling climate change, finance much-needed infrastructure investment, and create green jobs across the UK.

Comment

The Government has previously made clear that it intends to "lead from the front" on ESG matters, and this statement should be seen in that light. It also needs to be viewed in the context of the UK not adopting the EU’s Disclosure Regulation and, as a result, having to develop its own disclosure regime. It will be interesting in particular to see whether the UK takes a more "outcomes based" approach to these disclosures, rather than the more prescriptive granular approach taken by the EU.

It is not entirely clear whether the reference to the implementation of a new "green taxonomy" is a reference to the framework set out in the EU’s Taxonomy Regulation (the framework came into force earlier this summer and, as things stand, will be retained by the UK), or a new UK-specific taxonomy. More clarity on this would be welcome.

Tags

investment management, esg, alternative afm, private equity, institutional asset managers, financial services

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