Company disclosures on climate risks are to be made mandatory: BoE
October 26, 2020

Company disclosures on climate risks are to be made mandatory, says BoE

LONDON (UK) – A senior Bank of England official said on Friday that current regulations on company disclosures to help markets price in risks from climate change are to become compulsory.

It is the latest push in the financial sector to harmonise standards globally so that investors can better compare and track how companies are shifting to a lower-carbon economy and for asset managers to make more informed decisions.

Currently, regulations and rules vary widely across the world, detailing what information companies need to provide.

“Disclosing your plans can improve your credit rating, broaden your investor base, reduce your cost of finance, and economise on the fixed costs of meeting increasingly vocal investor requests for information,” the BoE’s executive director for markets, Andrew Hauser, told an Investment Association online event on Friday.

Britain, along with other countries, has been applying principles for companies on a voluntary basis from the global Taskforce on Climate-Related Financial Disclosures (TCFD).

“You can expect it to become mandatory,” Hauser said.

But TCFD was not granular enough to rigorously compare companies and more forward-looking measures were needed, he said.

He singled out three key building blocks to help do this to achieve the goals of cutting carbon emissions.

Standard setters needed to agree on a single, mandatory framework for companies to disclose risks from climate change, he said.

More tools were needed to provide incentives for green investment, and consensus on terminology for asset-allocation strategies to provide a “clear and credible” choice for investors, Hauser said.

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