Call for evidence to support update to UK’s green finance strategy

The strategy (43 pages / 12.3 MB PDF), first published in 2019, was designed to formalise the role of the financial sector in delivering global and domestic climate and environmental objectives. It set out proposals for green finance that are central to the UK’s clean growth strategy and the 25-year environment plan.

The government said the updated strategy would take stock of current progress and set out how the UK can better ensure the financial services industry is supporting the UK’s energy security, climate and environmental objectives. Its call for evidence contains 39 questions on four objectives: capturing the opportunity of green finance; mobilising finance for the UK’s energy security; climate and environmental objectives; and greening the financial system and leading internationally.

Tom Proverbs-Garbett, corporate governance expert at Pinsent Masons, said: “The UK government has set out its stall: it intends the UK to become a leading, if not the leading, light in green finance worldwide. Consultations such as this are an important opportunity to canvass views of market participants and other interested parties, but there remains an air of the protracted. The government's intention, expressed in its green financing paper (48 pages / 2.04MB PDF), is that the transition to net zero accelerates at pace, yet the consultation's questions, such as identifying areas of potential growth in green finance for the UK financial services sector, seem rather 'back to basics'.”

“The risk is that regulatory change lags far behind market practice - or fails to move that practice on. In a similar vein, the government has not yet consulted on its proposals for sustainability disclosure requirements (SDRs), also announced in 2021. As the SDRs were not mentioned in the summary of the Financial Services and Markets Bill announced in the Queen's Speech earlier this month, the previous sense of urgency seems to be slipping,” he added.

“One of the most difficult disclosures recommended by the taskforce on climate-related financial disclosures is identifying, categorising, and reporting supply chain emissions data. Recognising this, the government is asking whether understanding such data is important for investors. If it is, is there a role for the government to support businesses of different types and sizes to make good quality supply chain emissions disclosures, including small and medium sized entities in the value chain of disclosing entities? Given investor focus on climate, one would expect the government to be interested in some guise in supply chain emissions which, after all, often form the significant part of an organisation's emissions data,” said Proverbs-Garbett.

He added: “While the UK's default position, at least when it comes to corporate governance, is to be light on regulation, assistance with categorisation and sharing of data will surely be welcomed. The balancing act will be between assisting with supply chain emissions disclosures and burdening corporates with further disclosure; investors want decision-useful information, not additional volume.”

The government’s consultation on the green finance strategy closes on 22 June 2022.