UK 2023 Green Finance Strategy

After various delays, the Government expects to consult on the UK Green Taxonomy in Autumn 2023.  This is expected to include nuclear energy (subject to consultation) and may also include certain transitional activities.

The Government will initially expect in-scope companies to report voluntarily for a period of at least two reporting years.  This is intended to be a "testing period" in light of the challenges that have been experienced in other jurisdictions.  After this, the Government will consider mandating disclosures.  These are expected to include some form of proportionality to reduce the burden on smaller companies as well as to be drafted to maximise interoperability with similar rules in other jurisdictions.

The Government intends to consult on the introduction of requirements for the UK's largest companies to disclose their transition plans.  This is intended to complement existing FCA requirements, including potentially the principle of "comply or explain", and ensure parity between listed and private companies.  This consultation will take place once the Transition Plan Taskforce has finalised its framework in late 2023.

The proposals are expected to include an element of proportionality and may be based on reporting thresholds under the Companies Act 2006 with the requirements expected only to apply to the UK's most economically significant entities.

The Government will also assess whether the first of the IFRS Sustainability Disclosure Standards developed by the International Sustainability Standards Board, which are expected in June 2023, are suitable for adoption in the UK.  If adopted, these are likely to form the basis of future company law and FCA listed company requirements.

The Government also intends to take action aimed at growing key transmission channels for providing finance to transitioning businesses.  These include the implementation of the new Solvency UK regime (resulting from the review of the Solvency II framework) enabling the investment by UK insurers in productive investments, review of the UK stewardship framework (including the UK Stewardship Code) and possible clarification of the concept of fiduciary duty for pension scheme trustees.

The largest UK businesses have been required under Streamlined Energy and Carbon Reporting to report Scope 1 and Scope 2 emissions but (subject to a few limited circumstances) this does not include Scope 3 emissions.  As this is considered to be a major information gap for investors, the Government will launch a call for evidence to gather stakeholder views on how to support Scope 3 reporting and will also update the voluntary Environmental Reporting Guidelines.

The final Taskforce on Nature-Related Financial Disclosures (TNFD) framework is due to be published in September 2023 and the Government plans to explore how this should be incorporated into UK policy and legislation.

The Government believes that some organisations are struggling with aspects of reporting requirements for physical climate risks.  It therefore intends to work with industry partners to improve the approach to climate resilience assessment and disclosure through the development of adaptation metrics and guidance.  This is expected to be completed by the end of 2024.