UK Publishes New Climate Disclosure Requirements

The United Kingdom recently published "Greening Finance: A Roadmap to Sustainable Investing."  This document reflects and incorporates a number of environmental initiatives, including the principle that "[t]he financial system is [] critical to achieving net zero [greenhouse gas emissions] and protecting the UK's natural environment."  The focus of this report is twofold: (1) Sustainability Disclosure Requirements, or the reports and information that business must disclose; and (2) the UK Green Taxonomy, which establishes specific criteria that business must satisfy in order to be labelled environmentally sustainable (and thus to combat "greenwashing," where investments are misleadingly described as environmentally sustainable). 

The overarching principle animating this document is that consistent and uniform standards are needed in order to enable investors and the public to obtain and act upon useful and reliable information.  As stated by the report, "[t]here is a clear need for an effective government-led sustainability disclosures regime which enables the flow of comparable and decision-useful information on how companies and financial flows impact--and are impacted by--climate, the environment and broader sustainability factors," and "[t]he lack of common definitions makes it difficult for companies and investors to clearly understand the environmental impact of their decisions and can lead to consumer harms like greenwashing."  

This report then takes certain steps to establish these consistent standards and definitions, often by incorporating through reference other more detailed requirements, such as the disclosure requirements set forth by the TCFD.  For example, the UK government also states that it "will create a mechanism to adopt and endorse ISSB-issued standards for use in the UK," noting that the "International Sustainability Standards Board (ISSB) [is] develop[ing] global baseline reporting standards for sustainability, building on the work of the TCFD and other voluntary standard setters."   Even though this document itself does not delve into immense detail concerning the disclosure requirements (often because knowledge of these external standards is required), what is especially noteworthy is the schematic for the disclosure requirements and definitions that is provided by the report.  In particular, the categories of information and those entities responsible for providing the material offer certain guidance as to how companies may need to respond to these disclosure requirements under other regulatory regimes.   

It is likely that this report from the UK government will influence regulators in other developed economies, including the United States.