Directors back mandatory climate credential disclosure plan

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Most large companies and limited liability partnerships (LLPs) back plans to introduce mandatory climate-related financial disclosures, according to a report. 

The Government launched a consultation on 24 March 2021, seeking views on a plan to require mandatory climate-related financial disclosures from publicly-quoted companies, large private companies and LLPs.

It aims to allow investors to compare the climate credentials of companies by providing access to standardised, comparable information from those companies, which should allow more informed decisions to be made.

As part of this consultation, which closed last month, the Institute of Directors (IoD) polled more than 900 of its members and found 70% backed the move.

Additionally, 75% of directors believed either some changes or significant reform to the UK’s corporate governance framework is required to take greater account of climate change.

In April 2021, the Government set a revised climate change target to reduce the UK’s emissions by 78% by 2035 when compared to carbon levels in 1990.

The IoD said many directors already recognise the role their organisations must play in achieving this emissions target and that boards should lead the way.

Roger Barker, head of policy and corporate governance at the IoD, said:

“The climate crisis poses an existential threat to the global economy and wider society. It is imperative that business acts to minimise any further impact on climate trends.

“The Government has raised the bar by setting a challenging emissions target, but it can only be achieved if businesses respond, with boards setting a clear direction which is embedded throughout their organisations.”

The changes to the current reporting rules are likely to cost the affected 1,600 companies and LLPs an estimated £132.9 million a year, according to the Government’s impact assessment report.

Should the consultation be written into law, it’s likely to be announced in the next Budget – possibly in the autumn – and will take effect from 6 April 2022.

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