Minister also confirms at Net Zero Finance Summit that updated Green Finance Strategy and green taxonomy rules to be published later this year
Business, Energy, and Corporate Responsibility Minister Lord Callanan has urged companies to prepare themselves for climate risk disclosure rules coming into force this year, arguing that “sunlight is the best form of disinfectant” when it comes to boosting corporate resilience and driving the net zero transition.
Speaking at BusinessGreen‘s Net Zero Finance Summit this morning, the BEIS Minister and Conservative peer gave a broad overview of the government’s green finance plans for 2022, as he argued “information will be the lifeblood of financial markets”.
He confirmed that the UK Infrastructure Bank – backed by £12bn from government – is planning to publish its first strategic plan in June, which will address its growing green remit. Moreover, the government plans to legislate for its ‘green taxonomy’ plans before the year is out, in addition to publishing an update to its 2019 Green Finance Strategy later this year, he said.
And, from April this year, regulations are set to start coming into force, initially applying to over 1,300 of the UK’s largest UK registered public and private firms, requiring businesses to report on risks and opportunities in line with the Taskforce on Climate-related Financial Disclosure (TCFD) guidelines.
By 2025, the government is aiming for TCFD disclosure rules to apply right across the UK economy, with more and more major organisations also having to set out net zero transition plans.
Quizzed as to whether businesses are fully prepared or aware of the upcoming requirements, Lord Callanan said that understanding “varies” and conceded some company directors had more work to do ahead of the regulations coming into force. Some firms are already disclosing their climate risks and opportunities, but “the problem is they haven’t been doing it in a consistent way”, he added.
“But those that aren’t ready, we have to try to make sure they are going to be ready,” he said. “A lot of directors haven’t really taken the issue that seriously. I think this will make sure that they are going to be taking it seriously.”
Companies will soon be starting to report on climate risk in significant numbers, and investors, the banking sector and individual shareholder groups will be asking ever deeper questions in greater numbers on net zero and climate strategies, piling further pressure on firms for action, he said.
“I think sunlight is the best form of disinfectant,” said Lord Callanan. “Transparency is important, and I think this will certainly help to add to the information stock that investors and shareholders have about their companies.”
Lord Callanan has only just taken over the green finance brief from his BEIS colleague Greg Hands in the past couple of weeks, giving him responsibility for the TCFD disclosure rules rollout over the coming years, as well as a major role in delivering an updated Green Finance Strategy later this year.
Speaking earlier, he said the freshened-up Strategy – due in the autumn – would “set out how we will harness the strength of the UK as world’s leading financial sector to catalyse green investment and to accelerate delivery of net zero”, and that the government is “planning to carry out formal stakeholder engagement this spring” to feed into it.
“This will look to set out an update on how we plan to align the UK financial sector with the UK’s net zero commitment, and it would mean UK financial institutions setting out how they will decarbonise as the UK meets its ambitious, legally binding net zero targets,” he said. “And it also means strong government oversight of the financial sector as a whole to ensure that financial flows actually shift towards supporting net zero.”
Lord Callanan also said the government was currently working on its ‘green taxonomy’ – rules denoting what constitutes a ‘green’ investment – with plans to legislate on the planned guidelines before the end of the year.
Simultaneously, the EU is currently progressing its own green taxonomy guidelines in Brussels, with debates raging as to whether gas and nuclear power should count as ‘green’ under the regulations.
Lord Callanan remained tight-lipped as to the UK’s approach on these issues, although he said the government had been “following that debate with interest” in Brussels, adding that a consultation over domestic taxonomy rules would be launched “in the coming months”.
He stressed that the UK government was committed to the taxonomy being “science-based, accessible, and it must be built for the UK to support our global transition”, but declined to offer further details ahead of the forthcoming consultation.
Some of Lord Callanan’s Parliamentary colleagues in the Conservative Party have repeatedly voiced concerns over the supposed costs of delivering the UK’s net zero targets, despite overwhelming evidence pointing to the economic benefits and the far greater risks attached to not taking action on climate. Many others in government, meanwhile, continue to press the case for decarbonisation.
Lord Callanan conceded that there was “a robust debate” around net zero but stressed”that’s a good thing” as “people have the right to express their views”. However, he said the government remained committed to delivering on its legal climate requirements.
“As far as we’re concerned in government, net zero is a legal commitment – it’s not something that we can just pick and choose on,” he said. “Parliament’s already legislated for it. The job of government is to deliver on that legislation. We have a series of legally-binding carbon budgets to meet, and ultimately, as well as meeting net zero, it’s also about our own energy security. Surely it’s got to be a goof thing if we can generate more of the energy we use here in the UK rather than relying on unstable parts of the world.”
Finally, with media reports awash with splits in Cabinet over the UK’s forthcoming Energy Security Strategy which aims to reduce the UK’s exposure to risky, expensive global fossil fuel markets in the wake of Russia’s invasion of Ukraine, Lord Callanan said renewables should be a major part of the solution.
“One of the consequences of massively high gas prices is that it just demonstrates to us how we need to use less of it,” he says. “That’s fairly obvious. So we can go further and faster on our own homegrown renewable energy. We have one of the largest offshore wind capacities in the world, then that’s going to be a good thing. We can increase our offshore wind capacity, we can increase our solar capacity – at the moment they’re coming in cheaper than fossil fuels are.”
However, he added that North Sea oil and gas would still have a key role to play. “Having said that, we’ve got to recognise that this is a long-term transition, that we’re going to be needing gas over the next few years in order to help us in the transition,” he said. “Therefore if we are going to be using gas, I’m very much of the view that we’re better off using our own resources and to see if we can possibly do that.”