Major UK companies and financial institutions collectively responsible for over £4.5trn in assets have called on the government to make disclosure of net zero transition plans a mandatory requirement for large firms, warning that only a fifth of FTSE 100 entities have voluntarily published net zero targets and plans to date.
In a letter jointly addressed to Chancellor Rishi Sunak and Business Secretary Kwasi Kwarteng today, the companies argue such a policy would help address climate risks across the UK economy and burnish the government’s global climate leadership credentials ahead of the COP26 Climate Summit in November.
The UK has a “clear opportunity to catalyse a stronger and more resilient economy” by making net zero strategies mandatory for large companies, which would create a level playing field and help ensure the business and finance community is prepared to meet the goals of the Paris Agreement, the letter argues.
The signatories – who include a raft of top brands such as BT, Kingfisher, Tesco, Aviva, LGIM, Mitie, RLAM and Santander – argue transition plans are crucial for firms to credibly deliver on their net zero goals and for financial institutions to decarbonise their investment portfolios.
Mitie chief executive Phil Bentley said sustainability targets were “meaningless without an action plan to make them a reality”.
“By mandating that businesses disclose their own net zero transition plans, government can play a key role in helping the nation go further, and faster, towards the decarbonisation of Britain,” he said.
The Green Finance Institute and industry groups such as the Association of British Insurers (ABI), IEMA, and the Aldersgate Group, as well as think tanks and green groups such as E3G and WWF, are also backing the calls.
Michelle Scrimgeour, CEO of LGIM and co-chair of the government’s COP26 Business Leaders Group, stressed the need for “substantial change across economies and society globally” to achieve net zero emissions.
“While there is clear progress in many areas of industry, it will not be enough and we are supportive of the government in its aim to raise standards across the entire market,” she said. “There is still much to do and we all need to play our part. Inaction is simply not an option.”
The letter follows a similar call for mandatory net zero goals last week from WWF, which said it had carried out fresh analysis showing only 19 per cent of the FTSE 100 have so far disclosed a credible climate action plan to reduce their emissions to net zero by 2050.
The government has gone so far as to publicly urge firms to voluntarily set net zero goals and disclose strategies for delivering on these targets, in addition to announcing the imminent introduction of mandatory reporting rules in line with the recommendations of the Taskforce on Climate-related Financial Disclosure (TCFD), which would require larger firms to report on climate-related risks but not necessarily set net zero targets.
As such today’s letter urges the government to provide greater clarity on how these TCFD reporting requirements will cover transition plans and other net zero-related disclosures, arguing that net zero transition plans should be made mandatory for large companies by 2025.
With time running short to deliver the deep decarbonisation required over the coming decade to keep the goals of the Paris Agreement within reach, there is now a need to move from voluntary to mandatory net zero targets for companies in order to accelerate action, the letter suggests.
Ingrid Holmes, executive director at the Green Finance Institute, said such a move would help improve the quality and credibility of corporate net zero strategies. “To date the transition plans companies have published have been of variable quality and transparency, better guidance is clearly needed – including the role and value of including information about alignment to the forthcoming UK taxonomy,” she explained.
The Department for Business, Energy and Industrial Strategy (BEIS) was considering a request for comment at the time of going to press.
But E3G’s chief executive Nick Mabey hailed the intervention by major businesses and the growing support for clear rules to make net zero strategies a mandatory requirement. “This remarkable letter shows there is strong and broad business support not only for disclosing risks but also for showing how companies will actually deliver on their promises,” he said. “Ahead of COP26 the UK can set a global example in flushing out greenwash by supporting firms who show true climate leadership.”
The letter comes on the same day as the Make My Money Matter campaign similarly called for a mandatory requirement for large pension funds to introduce net zero targets.
The calls follows research yesterday by the Natural History Museum which warns the world’s biodiversity has fallen below “the safe limit” due to habitat destruction and unsustainable agricultural practices, with the UK’s natural habitats in particular having faced monumental decline over recent centuries.
Scientific analysis of over 58,000 species carried out by the Museum found that the UK only has half – 53 per cent – of its entire biodiversity left, putting it in the bottom 10 per cent of all countries around the world, behind nations such as the USA and China.
Globally biodiversity intactness, which records the proportion of the original number of species in an area that remain and their abundance, is measured at 75 per cent, according to the analysis.
However, that is significantly below the 90 per cent average set as the ‘safe limit’ to maintain the ecological processes such as pollination and nutrient cycling that are vital to humanity’s survival, according to the Museum.
The research has been released to coincide with the COP15 UN biodiversity summit kicks off in Kunming, China, this week, at which there are hopes of countries agreeing a global Paris Agreement-style treaty to stem biodiversity loss.
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