‘Greening Finance: A Roadmap to Sustainable Investing’ sets out the government’s long-term ambition to green the financial system and align it with the UK’s world-leading net-zero commitment. This will happen in three phases:
- Informing – ensuring decision-useful information on sustainability is available to financial market decision-makers
- Acting – mainstreaming this information into business and financial decisions
- Shifting – financial flows across the economy shifting to align with a net-zero and nature-positive economy
This document focuses on the first phase, which will be delivered through new economy-wide Sustainability Disclosure Requirements. It sets out implementation pathways for different sectors of the economy and provides more detail on the requirements, including that they will be:
- Integrated – investment products, financial services firms, and real economy corporates will be required to report consistent information on sustainability.
- Streamlined – the regime will streamline existing disclosure requirements – such as the UK’s commitment to make reporting aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) mandatory – with new requirements, including on reporting environmental impact.
- Consumer-focused – investment products will need to set out consumer-focused disclosures showing the impact, risks and opportunities of the activities they finance on sustainability. This will be accompanied by a consumer-facing label developed by the FCA so that consumers can make informed investment decisions that take sustainability into account.
- Credible – asset managers, asset owners and investment products will be required to substantiate sustainability claims they make.
- Robust – disclosure requirements will include reporting under the UK Green Taxonomy, which will provide a robust list of economic activities that count as environmentally sustainable.
- In line with international standards – the UK is a strong advocate for international standards for sustainability reporting, and is preparing the ground to adopt international standards in this area (subject to consultation).
Of course, this information will only be impactful if it is actually used by investors. The document calls the pensions and investment sectors to action, outlining the government’s expectations that they will use the information generated to help shift their financial flows to align with a net-zero, nature-positive economy.
Lastly, the document highlights how the UK is leading international efforts to bring about global and systemic change in the financial system, including through the UK’s G7 presidency and by rallying the international community ahead of COP26.