Updated Green Finance Strategy

In a big week for green news, the UK government last week published its ‘Green Finance Strategy 2023’ (GFS) which sets out its plan to mobilise the investment needed to meet climate and nature objectives and make the UK the ‘world’s first net-zero aligned financial centre’. The UK government also released a suite of new policy documents relating to energy security and net zero investment and innovation – in this post, we cover the ‘Powering up Britain’ report.

The GFS, developed by HM Treasury, the new Department for Energy Security and Net Zero and the Department for Environment, Food and Rural Affairs, provides more detail about policy initiatives previously set out in two milestone publications on green finance: the 2019 Green Finance Strategy and the 2021 Greening Finance Roadmap.

The highlights are:

• The proposed Sustainability Disclosure Requirements (SDR) regime is moving ahead, but new Financial Conduct Authority rules on disclosures and sustainable investment labels have been delayed to Q3 2023 (due to the volume of consultation feedback received).
• The UK Transition Plan Taskforce will consult on introducing requirements for the UK’s largest (not just listed) companies to disclose their net zero transition plans.
• The International Sustainability Standards Board Sustainability Disclosure Standards will be assessed via a formal mechanism for incorporation into UK company law alongside a broader review of the UK’s non-financial reporting framework.
• Steps to standardise reporting about scope 3 GHG emissions will be taken starting with a call for evidence later this year to better understand the costs and benefits of producing and using this information.
• The UK Green Taxonomy (to provide investors with ‘definitions of which economic activities should be labelled as green’) will proceed and will include nuclear as a ‘crucial source of reliable low carbon energy’ (subject to consultation in Autumn).
• The Risk Management and Disclosure Framework developed by the Taskforce on Nature-related Financial Disclosures (expected in September 2023) will be brought into the UK policy and legislative architecture.

The GFS makes clear that the UK government intends to position the UK as a global hub for trading in the Voluntary Carbon Markets and will run a consultation later this year that will respond to the key recommendations of the Independent Net Zero Review and the Climate Change Committee’s report on Voluntary Carbon Markets and Offsetting.

Further information and clarity for trustees on their fiduciary duty in the context of the net zero transition will be provided via a review of the Stewardship Guidance in late 2023.

The GFS emphasises the crucial role of private investment and capital in delivering net zero, building climate resilience and supporting nature’s recovery. There is planned work with the Green Finance Institute to explore how ‘blended finance’ models might be used to activate private finance to support green objectives.

Corporates and investors should be watching closely to keep on top of new reporting requirements and new opportunities stemming from the transition to a decarbonised economy.

The GFS was released alongside a broader suite of policy documents unveiled on 30th March - dubbed the UK government's “Green Day”. Read here for our analysis of the day and what was (or wasn't) announced.