On the paper trail to Glasgow and COP26

We have seen six reports published this week that represent a step up in gear as we head towards COP26 in Glasgow. Four governmental, the fifth and sixth more regulatory and market orientated.

On Monday 18 October, government departments coordinated to publish Greening finance: A roadmap to sustainable investment. The roadmap sets out details of new economy-wide Sustainability Disclosure Requirements, and the legislative and regulatory changes that will be made to deliver them. These will, for the first time, bring together UK sustainability reporting requirements under one integrated framework. The roadmap also acts as a call to action for the pensions and investment communities, outlining expectations that they will use the information generated to help shift their financial flows to align with a net-zero, nature-positive economy.

Initially focused on climate risks, the regime will extend to encompass broader environmental, social and governance (ESG) factors. For this, it commits the UK government to creating a mechanism to adopt and endorse global standards to be issued by the now-named International Sustainability Standards Board (ISSB). The roadmap spans both the need to complete a UK Green Taxonomy to guard against ?greenwashing? and the expectation that companies will increasingly publish transition plans. Several overlapping consultations are planned.

On Tuesday 19 October, BEIS published the Net Zero Strategy outlining measures to transition to a green and sustainable future, helping businesses and consumers to move to clean power, supporting hundreds of thousands of well-paid jobs and leveraging up to £90 billion of private investment by 2030. It includes new investment in support of vehicle electrification, their supply chains and on-street residential charging points, industrial carbon capture and green hydrogen projects and monies toward further green innovation, decarbonising heat and buildings, nature-based projects and nuclear.

This followed the publication of the Heat and Buildings Strategy aimed at helping to drive down the cost of low carbon heating technologies such as heat pumps for consumers. This strategy aims to provide a clear direction of travel for the 2020s, set out the strategic decisions that need to be taken this decade, and demonstrate how government plans to meet its carbon targets and remain on track for net zero by 2050. It makes reference to the need to ensure private rental sector properties meet EPC rating of C by 2028 and domestic properties by 2035 ?where practical, cost-effective and affordable?.

The Net Zero Review is an analytical report that uses existing data to explore the key issues as the UK decarbonises. This is set against a backdrop of uncertainty on technologies and costs, as well as changes to the economy over the next thirty years. It considers the potential exposure of businesses and households to the transition and highlights factors to be taken into account when designing decarbonisation policy that will allocate costs over this time horizon. Overseen by HM Treasury, it acknowledges that an integral part of government policy will be the need to support households ?as necessary?.

Throughout the week, the UN Environment Programme Finance Initiative (UNEP FI) has continually updated the number of banking groups signed up to the Net Zero Banking Alliance (NZBA). Launched on 21 April with the support of 43 banks from 23 countries, as of yesterday afternoon the number of signatories stood at 82 banks from 36 countries with responsibility for US $60 trillion of assets amounting to 39 per cent of global banking assets. Interlinked to this, on Wednesday 20October, the Financial Services Task Force (?FSTF?), part of HRH The Prince of Wales? Sustainable Markets Initiative (SMI), published a Practitioner's Guide to support banks across the world in developing and implementing net zero strategies. The guide brings to life the approaches and actions banks are taking to operationalise their net-zero strategy.

Meanwhile on Thursday 21 October, the Climate Financial Risk Forum (CFRF), co-chaired by the Financial Conduct Authority (FCA) and the Bank of England, published its second round of guides. Written by industry practitioners, the guides focus on risk management, scenario analysis, disclosure, innovation and climate data and metrics. They build on those published in June 2020 and will help firms respond effectively to climate-related financial risks. By way of illustration, the risk management material includes guidance in support of risk appetite statements that integrate climate-related financial risks, while the scenario analysis material includes practical examples of how firms can incorporate sector specific factors, and plans further work in support of smaller firms.

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