National governments have set bold targets to reduce emissions. The UK Government led the world by enshrining this in law with the cross-party backed Climate Change Act in 2008, and followed in 2020 with a target to reach net zero emissions by 2050. This commitment is already shaping the policy landscape and will continue to do so as the UK moves to decarbonise.
Financial regulators, in particular, are also introducing more controls as the financial and economic implications of climate change become clearer. The UK’s decision to mandate climate-related financial disclosures across the economy by 2025 is one example of this growing trend.
Non-executive directors need to understand the implications of these targets, and the policies and regulations they are leading to, so their business is prepared and can commit to meaningful climate change plans.
Net zero progress
Governments around the world have set ambitious net zero targets including the UK, Germany, Japan, the US, China and the European Union. To see others, view the Net Zero Tracker.
What came out of COP26?
This Centre for Climate Engagement summary includes the key climate trends and announcements of most importance for non-executive directors and industry leaders from COP26 in November 2021. It includes key takeaways for NEDs.
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In October 2021 the Government published its Net Zero Strategy, setting out how it plans to meet the country’s legally binding climate goals and achieve a net zero economy by 2050.
The UK’s Net Zero Strategy: what does it mean for NEDs?
Our summary highlights the main points in the UK Government’s Net Zero Strategy, and what it means for non-executive directors.
This was accompanied by the HM Treasury’s Net Zero Review, which provides an economic analysis of the costs and opportunities associated with the UK’s net zero transition.
Other relevant strategies published in 2021 are:
- Greening Finance: A Roadmap to Sustainable Investing
- Heat and buildings strategy
- UK hydrogen strategy
- Oil and Gas Authority: The OGA Strategy
The Climate Change Committee (CCC) was created to provide independent advice to the UK Government on progress made in reducing greenhouse gas emissions and preparing for and adapting to the impacts of climate change as part of the Climate Change Act 2008. This includes the modelling of the UK’s Carbon Budget which provides ministers with advice on the volume of greenhouse gases the UK can emit during a given period to reach net zero by 2050.
Watch: The role of business in delivering the UK’s net zero ambition
This Chapter Zero and ICAEW event featured Chris Stark, CEO of the CCC and explored the role of business in delivering the UK’s net zero ambition and the 6th Carbon Budget.
The role of business in delivering the UK’s Net Zero ambition
Alongside its advice on the Sixth Carbon Budget, this briefing note explains how businesses in the UK can act to support the UK’s transition to Net Zero. December 2020.
Summary: Independent assessment of UK climate risk
The CCC has published its third independent climate risk assessment for the UK. Read our summary of the key points, with a focus on the headlines for business. June 2021.
Regulators like the Bank of England (BoE) are working to enhance the financial system’s resilience to climate change.
Watch Sarah Breeden, Executive Director for Financial Stability Strategy and Risk at the Bank of England, as she explains why climate change matters to it and what the BoE is doing in response.
Key elements of the 2021 Biennial Exploratory Scenario: Financial risks from climate change
This BoE discussion paper allows policymakers to explore the resilience of the UK financial system to a wide range of physical and transition risks associated with climate change.
Climate Thematic Review 2020
During 2020, the Financial Reporting Council (FRC) undertook a thematic review of climate-related considerations by boards, companies, auditors, professional bodies and investors. Its Climate Thematic Review 2020 highlights views on current market practice and outlines expectations.
IFRS Consultation Paper on Sustainability Reporting
The Trustees of the IFRS Foundation have published a Consultation Paper to assess demand for global sustainability standards and, if demand is strong, assess whether and to what extent the Foundation might contribute to the development of such standards.
The Financial Stability Board (FSB) monitors and assesses vulnerabilities affecting the global financial system and proposes actions needed to address them. It formed the Taskforce on Climate-related Financial Disclosures (TCFD) to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders.