British companies will be forced to reveal the impact they are having on the environment by 2025, Chancellor Rishi Sunak has announced.
Under the new rules, UK-based firms will have to ensure they provide thorough reports to shareholders, which will allow investors to direct their money to more climate-friendly firms, or to track improvements.
It comes after the Government last year adopted a commitment to ensure the UK is emissions net zero by 2050.
Making a statement in the Commons, Mr Sunak said: “We will be the first major economy, the first in the G20, to mandate disclosures by 2025.
“There is a road map that has been published today – it is the most ambitious timetable that any major economy has done to date.
“In fact, it goes far beyond what was recommended by the taskforce themselves and I think it is something that we, at least on this side of the House, will be very proud of.”
The Chancellor added that financial services “will be essential to our economic recovery from coronavirus, creating jobs and growth right across our country”.
He told MPs: “As we leave the EU and start a new chapter in the history of financial services in this country, we want to renew the UK’s position as the world’s pre-eminent financial centre.”
Mr Sunak said he was setting out plans “to make this country more open, more technologically advanced and a world leader in the use of green finance”.
He continued: “This is the start of a new chapter for financial services, the industry is better regulated, better capitalised and more resilient than in 2008. Coronavirus has reminded us financial services are essential services.”
The Chancellor added that the Government’s “new vision” for the sector will be “based not on a race to the bottom but for a financial services industry that is open, is innovative and leads the world in the use of green finance”.
Shadow chancellor Anneliese Dodds warned the Government there remains an “elephant in the room”, regarding market access to the EU for UK firms.
She said: “While we debate these often welcome measures, we mustn’t forget the elephant in the room. This Government’s mishandling – I’m calling it that because that’s what it is – of ensuring market access for our firms to our largest trading partner.
“One in every 14 UK workers are employed in financial and related professional services.
“Yet the City of London Corporation recently said approaches to negotiations make them feel like the neglected child of an acrimonious divorce.
“With weeks to go until we leave the transition period, we still don’t know whether the EU will determine that our rules are equivalent to theirs.”
The shift away from polluting fuels will require a major reset of the UK’s economy, including plans to get petrol and diesel cars off the roads, and to greatly expand the use of wind and solar power.
Critics have taken aim at the Chancellor in recent months for not including climate requirements from companies that have been kept afloat by the Government support during the Covid-19 pandemic.
However, Bank of England governor Andrew Bailey said on Monday that the Government had been right not to tie the rescue with green targets.
“In the face of such an emergency, in all conscience it was not right to say to people that they would be denied a livelihood because their employment was of the wrong sort for the climate,” he said.
“What we cannot measure we cannot manage, so it is important that financial firms and their clients use the TCFD (Task Force on Climate-related Financial Disclosures) framework and the latest tools available to measure, model and disclose the climate risks and opportunities they are exposed to today and in different future climate scenarios.
“We at the Bank started to do this ourselves when we published our own climate disclosure this summer.
“We are now working with the Treasury and other regulators to consider the UK’s approach to climate disclosure.”
The global climate agenda was boosted with the election of Joe Biden as the next US president.
He has pledged strong action on climate change after his predecessor Donald Trump removed the country from the Paris Climate Agreement.
Many global leaders, including UK Prime Minister Boris Johnson, spoke about climate change while congratulating Mr Biden on his victory over the weekend.