COP26: UK firms forced to plan for low-carbon future

Most big UK firms and financial institutions will be forced to show how they intend to hit climate change targets, under new Treasury rules.

By 2023, they will have to set out detailed public plans for how they will move to a low-carbon future - in line with the UK's 2050 net-zero target.

Plans will be submitted to an expert panel to ensure they are not just spin.

But net-zero commitments will not be mandatory and green groups say the proposals do not go far enough.

Firms and their shareholders will be left to decide how their businesses adapt to this transition, including how they intend to decarbonise the emissions they finance.

On the third day of the COP26 climate summit in Glasgow, Chancellor Rishi Sunak will outline the move to make the UK the first net-zero financial centre.

He will address an audience of finance ministers, central bank governors, heads of multilateral financial institutions and senior industry leaders, as part of a day dedicated to finance.

The chancellor will also announce that 450 firms controlling 40% of global financial assets - equivalent to $130 trillion (£95tn) - have now aligned themselves to limit global warming to 1.5C above pre-industrial levels.

He will say advances have been made to "rewire the entire global financial system for net zero" under the UK's leadership of the conference.

On Tuesday, Prime Minister Boris Johnson said he was "cautiously optimistic" about the progress made at the summit, after key deals on deforestation and methane emissions were agreed - but he said there was still "a long way to go".

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Under the new Treasury rules, financial institutions and listed companies in the UK must come up with net-zero transition plans, which will be published from 2023.

The strategies will need to include targets to reduce greenhouse gas emissions, and steps which firms intend to take to get there.

A Transition Plan Taskforce made up of industry leaders, academics, regulators and civil society groups will also be set up by the government.

It will set a science-based "gold standard" for the plans in order to guard against so-called "greenwashing" - where environmental initiatives are more about marketing than substance.

However, the government said there was "not yet a commonly agreed standard for what a good quality transition plan looks like".

And although the plans will need to be published, the government said "the aim is to increase transparency and accountability" and the UK was not "making firm-level net-zero commitments mandatory".

Meanwhile, Mr Sunak is also expected to pledge that a target for developed countries to send $100bn (£720m) a year to those that are less developed - to help support their transition to net zero - will be achieved by 2023.

Kay Swinburne, vice-chairman of financial services at KPMG UK, said the announcement on UK firms would provide the financial services industry with a "valuable set of unified metrics to measure progress towards decarbonisation".

"It is brave to put a gold standard in place for all companies raising funding," she added.

And Dr Ben Caldecott, director of the UK Centre for Greening Finance and Investment, said the plans would "spur demand for green finance and accelerate decarbonisation, not just in the UK but wherever UK firms do business".

But Shaun Spiers, executive director of environmental think tank Green Alliance, said that while the plan was welcome it would not happen fast enough.

"Private sector investment is vital, but it will be much easier to achieve on the back of serious investment by the chancellor," he said.

David Barmes, senior economist at the campaign group Positive Money, said: "While it's positive to see financial institutions scaling up their green finance commitments, this announcement says nothing of the billions they're still pouring into environmentally harmful projects.

"We need public institutions rather than bank CEOs to lead the way in setting standards and delivering green investment.

"The public investment announced by the UK government so far is nowhere near enough to meet their climate targets, and we will need huge increases to ensure a green transition that is both timely and fair."