Ministers made a last-minute decision to withdraw plans to force big UK companies and asset managers to disclose their environmental impact from Tuesday’s Queen’s Speech, according to government sources.
The decision to drop the “sustainability disclosure requirements” from a new financial services bill comes amid a wider retreat by the government from tightening corporate governance.
Other postponed measures — partly at the behest of David Canzini, deputy chief of staff in Downing Street — included audit reforms, stronger powers for the internet regulator and the regulation of professional football.
The Treasury said it “remained committed to implementing sustainability disclosure requirement and will proceed with the necessary legislation in due course”.
October’s announcement by Rishi Sunak, UK Chancellor, that larger UK companies, investment firms and pension schemes will have to disclose the environmental impact of their activities was made.
The SDRs will force companies to justify their sustainability claims “clearly” while setting out their transition plans to help meet Britain’s target of becoming net zero carbon by 2050.
These rules will cover disclosure requirements for investment products, asset owners and managers, and listed companies.
The government said that it would allow the International Financial Reporting Standards Foundation to set corporate reporting standards in conjunction with those of the government. This is an international body that is currently developing its own climate-related standard.
While ministers never announced that the SDRs legislation would be in the financial services bill, or the wider Queen’s Speech, they had privately hoped to do so until late last week.
One aide said there had been a last-minute U-turn: “I would see this in the context of Downing Street not wanting to impose new regulations on business at this stage.”
Canzini, who is said to have strong free market instincts, has told aides to drop or postpone policies which could be seen as “unConservative” in order to differentiate the party from Labour.
Government officials said “the best vehicle for delivering” SDRs had yet to be decided.
They claimed that the financial services bill was already a substantial piece of legislation that could be weighed down by parliament if it became longer.
Officials noted that progress was still being made under the auspices the Department for Business, Energy and Industrial Strategy and Financial Conduct Authority, for example, in moving towards mandatory disclosures for financial firms regarding transition planning. They confirmed that legislation would be required for the new system.
The government’s Transition Plan Taskforce will create the framework under which companies must disclose their plans for transitioning to net zero. This week, it issued a call to evidence.
Climate Capital
Climate change meets politics, markets, business. Explore the FT’s coverage here.
Are you curious about the FT’s environmental sustainability commitments? Learn more about our science-based goals here
Shadow energy secretary Ed Miliband said that the government was abandoning its commitments just six months after hosting the COP26 global climate negotiations in Glasgow. “The government going backwards on this is the wrong choice and holds back UK’s — and the global — green transition.”
Heather McKay, policy adviser for sustainable finance at the think-tank E3G, said the Queen’s Speech had been “a bit of a damp squib” for tackling climate change.
“There was a real potential with the financial services bill to underpin that green economic firework display of innovation around how we manage climate risk in the UK.”
The Treasury insisted that the UK was still at the forefront of efforts to ensure corporate environment disclosure.
“The UK was the first major economy to commit to mandatory climate reporting and we have made good on that commitment by establishing a full regime this year,” the department said. “Today, we also launched a call for evidence to develop the gold standard for transition planning, helping to deliver our ambition to make the UK the world’s first net zero aligned financial centre.”