MPs: Government’s ‘mixed messaging’ policies undermining net-zero finance shift

The EAC has today (29 November) called on the Government to overhaul the progress it has made against key pledges made in Glasgow at COP26 in 2021.

At COP26, then-Chancellor Rishi Sunak unveiled a Government vision of the UK becoming a ‘net-zero financial centre’. One such mechanism was the mandatory requirement for some UK firms to publish transition plans outlining how they would become net-zero organisations.

Last month, a dedicated Taskforce delivered what it calls a “gold standard” Disclosure Framework for corporate climate transition plans, which aligns with globally recognised reporting frameworks and standards.

The Transitions Plan Taskforce states that a company’s transition plan should take a strategic and rounded approach that explains how it will meet climate targets, manage climate-related risks, and contribute to achieving net-zero.

However, the EAC is concerned that the ‘comply or explain’ approach to mandatory transition plans defeats the point of the policy, because some companies can comply by simply disclosing that they don’t have a plan in place.

In response, the Committee urged the Government to not only keep the mandatory requirement, but also to monitor and evaluate how effective the mandate is.

The EAC also recommends that the Government must phase in compulsory Taskforce on Nature related Financial Disclosures (TNFD) over the next three to five years.

The EAC’s Chair, Rt Hon Philip Dunne MP, said: “At COP26, the Government made ambitious commitments to make even greater progress in embedding climate and nature into financial decision making. The Government should implement swiftly its initiatives on mandatory transition plans, a UK green taxonomy, and carbon leakage mitigation measures. Any delay is likely to send mixed messages to the financial sector that the UK is wavering on its ambitions, as set out at COP26, to become the first net zero-aligned financial centre.

“The Government must turbocharge its efforts once again in green finance: it is an enormous opportunity to shape the carbon financial markets of the future, yet the market alone cannot revolutionise in the way needed. The Government must not underestimate its own influence.”

Last year, edie spoke with experts at the Green Finance Institute (GFI) and the UK Sustainable Investment and Finance Association (UKSIF) to explore whether any meaningful progress has been made towards the lofty ambition. You can read what these organisations had to say here.