Green finance strategy

The UK government has published a revised green finance strategy which follows the publication of a first version in 2019. The revised strategy – under the general heading „mobilizing green investment“ – takes forward some of the inititatives launched in 2019 and presents new measures that the government intends to take to achieve the following key objectives:
1. UK Financial Services Growth and Competitiveness – supporting the UK’s financial services sector to ensure that it continues to grow and benefit from a „transitioning global economy“;
2. Investment in the Green Economy – fostering private investments to raise an additional £50-60 billion a year to support the UK’s transition to net zero carbon;
3. Financial Stability – setting out an effective green finance framework that ensures that climate-related risks are adequately taken into account by firms to prevent market disruptions and shocks;
4. Incorporation of Nature and Adaptation – incorporating nature and climate into the UK Government’s green finance policy framework; and
5. Alignment of Global Financial Flows with Climate and Nature Objectives – supporting international transition efforts and encouraging investment in emerging and developing markets.
The above noted initiatives outlined in the document include the following, among others. Please note in this context, that we focus on those relevant to the financial market only.
(1) potential adoption of the new reporting standards developed by the International Financial Reporting Standards (IFRS) Foundation and its new International Sustainability Standards Board (ISSB): Following the publication of corresponding reporting standards which are expected for summer this year, the government will launch an official assessment of the standards to determine their suitability for the UK financial market. For this assessment activity, the government plans to install two new advisory committees, one led by the government, the other led by the Financial Reporting Council (FRC) to assess the technical aspects of the upcoming standards. A decision is expected within the next 12 months.
(2) sustainability disclosure requirements (SDR): Following the launch of a consultation on SDRs among asset managers both at product and at entity level (please see EventID 17994 in this context for more information), the government plans to develop a similar, yet broader framework for all financial market participants. Details of the framework are not yet available, but are expected for the summer 2023. It is clear, however, that the new framework will reflect all developments as regards sustainability disclosures up to that point.
(3) guidance on transition plans: To foster firms‘ interim, high-level planning as regards climate risk, the newly launched Transition Plan Taskforce will deliver a corresponding guidance by summer this year. In this context, the government also notes that later in 2023, it will launch a consultation on „the introduction of requirements for the UK’s largest companies to disclose their transition plans if they have them“. The consultation will be in line with the disclosure requirements of the FCA (Financial Conduct Authority) and will create a level playing field among companies that are already captured by the FCA disclosure requirements and those that are not.
(4) development of a green taxonomy: As a taxonomy is crucial to raise awareness to climate-related risks and to adopt corresponding dislosure requirements, the government plans to create a UK green taxonomy. First engagements with stakeholders are planned for the fall of 2023. It may be worth noting in this context that nuclear energy will be part of the government’s taxonomy, as the deployment of this energy source is essential for transitioning to net zero carbon.
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To conclude, the government outlines its upcoming (regulatory) activities during 2023 which are presented in below noted table:
Table 1: Upcoming (regulatory) activities of the UK government in 2023