Bank of England to Require Company Disclosures on Climate Risks

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Current rules on company disclosures to help markets price in risks from climate change will become mandatory, a senior Bank of England official said on Friday.

It is the latest push in the financial sector to harmonize 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.

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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 economize 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.

“For much of the past decade, those three building blocks have been slow to develop, or vulnerable to charges of ‘greenwashing’ or projects, vehicles or investment strategies that are ‘green’ in name only,” Hauser said.

More countries have begun issuing green sovereign debt and the UK Debt Management Office is considering such a move, Hauser said.

“There is are some pretty hard incentives that other governments have embraced… In sovereign green bond issuance in the last three to four months there has been an explosion,” Hauser said.

(Reporting by Huw Jones; editing by Andy Bruce, Larry King)

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