LONDON (Reuters) – Britain launched a public consultation on Wednesday on a proposal to require big companies to disclose the risks they face from climate change as soon as 2022, which would make it the first major economy to make such disclosures mandatory.
The business ministry said disclosures should be in line with recommendations from the global Task Force on Climate-related Financial Disclosure (TCFD), set up by the G20 rich countries to coordinate rules.
The disclosures, now voluntary, would become mandatory for large, privately-held businesses as well as for those with shares listed on public markets. Britain flagged the move late last year.
“To support our transition to net zero, the Government considers it important to ensure that companies with a material economic or environmental impact or exposure assess, disclose and ultimately take actions against climate-related risks and opportunities,” the business ministry said.
“This will make the UK the first G20 country to make TCFD-aligned disclosures mandatory across the economy, further cementing our position as a world-leader in this regard.”
Under the TCFD’s recommendations, companies are urged to disclose the actual and potential impacts of climate change on their business, as well as explain how they identify and manage such risks and opportunities.
Graphic: TCFD Mandatory Disclosures – https://fingfx.thomsonreuters.com/gfx/mkt/oakpeljedvr/TCFD%20Mandatory%20Disclosures.PNG
A move to make such disclosure mandatory in Britain is seen as a big step towards a new set of global standards.
The ministry said it was backing a move by the IFRS Foundation, which writes global accounting rules, to develop international sustainability-related reporting standards.
Consultants EY said that by last autumn, fewer than half of the top UK-listed companies had fully or partially adopted TCFD recommendations in corporate reporting, a sign of the scale of work still to be done.
While more companies are reporting climate risks, the quality of the disclosures needs to be improved, EY added.
The Investment Association, which represents asset managers, welcomed the proposal to make climate risk reporting mandatory.
The move would “support investment managers to better communicate climate risk to their pension fund clients, enabling them to meet their disclosure requirements and better understand the impact of their investment portfolios,” said Sarah Woodfield, stewardship manager at the Investment Association.
(Reporting by Huw Jones; Editing by Peter Graff)