The UK Government has released its latest guidance on greening the financial system in its report ‘Greening Finance – A Road to Sustainable Investing’, published on Monday 18th October 2018.
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This 'roadmap' document provides an indication of the timelines for consultation and expected implementation. It is worth noting that the new Sustainable Disclosure Regulation regime will aim to encompass existing sustainability disclosure requirements for financial services and businesses, as well as new requirements, into one single, integrated framework. It highlights three types of disclosures that the regime will cover:
1) For financial services and companies
This will look to include disclosures against the ‘green taxonomy’ (firms will need to disclose the percentage of their capital spending and turnover relating to taxonomy-aligned activities); Task Force on Climate-Related Financial Disclosures (TCFD), and in time, and subject to consultation, reporting under international standards developed by the International Financial Reporting Standards' International Sustainability Standards Board (ISSB). The UK is currently inclined to endorse the ISSB’s standards as opposed to those standards being considered by the European Financial Reporting Advisory Group (EFRAG), which is contributing to the development of sustainability reporting standards in the EU. Essentially, in the UK, there is the view that TCFD reporting will potentially evolve into reporting under IFRS standards in future, depending on the latter’s final make-up.
2) For asset managers and asset owners
This will bring in new requirements for these groups to ensure they disclose how they take into account clients’ sustainability preferences.
3) For investment products
New rules will come in place requiring products to report on their sustainability impact, and this will help form the basis of the Treasury/FCA sustainable investment labelling regime. The labels are intended to classify products against certain sustainability criteria, and a discussion paper will be published shortly by the FCA outlining further detail.
The details of the planned timeframe for introduction are outlined on pages 18 and 19 of Greening Finance – A Road to Sustainable Investing.
We are currently reviewing this report and its implications in detail and interpreting what this means for your business. In the meantime, take a look at the full report below and please do not hesitate to contact us. if you would like to discuss in more detail.
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