The UK is expected to announce new rules for London-listed companies, which will be required to publish regular updates on how they are planning to become more environmentally friendly.
If the firms do not share their ‘transition plans’, they might face fines or even delisting.
The Financial Conduct Authority (FCA) will be in charge of overseeing the publications, which will have to follow a science-based ‘gold standard’.
The initiative could be enforced as early as 2023.
Finance day @COP26 will see @RishiSunak set out plans for the world’s largest international financial centre @cityoflondon to become the world’s first net zero-aligned financial centre, underpinned by world-leading regulation and economy-wide net zero transition plans.
— Ben Caldecott (@bencaldecott) November 2, 2021
Chancellor Rishi Sunak is due to announce the new measure on Wednesday as part of the government’s effort to go net-zero by 2050.
Speaking at COP26, he has pledged to "rewire" the global financial system for net-zero.
The UK has committed a total package of £576mln to mobilise finance into emerging markets and developing economies to fund their green transition, as well as £100mln to help developing countries with climate finance.
Sunak said that Britain will become "the world’s first net-zero financial centre" and said that around 40% of global financial assets, worth US$130 trillion, is now being aligned with the climate goals in the Paris Agreement, including limiting global warming to 1.5C.
These commitments come from over 450 firms from all parts of the financial industry, based in 45 countries across six continents.
Sunak said that the goal is to "mobilise private finance" by providing capital to boost investment and called on other governments to enact bold climate policies to take advantage of these enormous financial resources.
Chancellor Rishi Sunak unveiled plans to make the UK the first net-zero financial centre during a speech at the #COP26 Finance Day. You can read the response from @sarahgor, Chief Executive of the Impact Investing Institute, below. pic.twitter.com/Ymi7p963SN
— Impact Investing Institute (@ImpactInvInst) November 3, 2021
"It won’t be plain sailing," commented Rob Doepel, EY’s UK managing partner for sustainability, highlighting this "is an extremely positive step in the fight against climate change".
"The challenge for companies will be how to construct these plans and what level of detail is required to be compliant. A potential stumbling block here could be the amount of time spent agreeing common standards. The taskforce needs to set bold time targets on agreeing the framework, but this shouldn’t distract from other positive action being taken – there are many ‘no regret’ steps that companies can take without having detailed, comprehensive decarbonisation plans in place."
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