UK Hope ‘Gold Standard’ Leads To World’s First Net-Zero Aligned Financial Centre

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UK Hope ‘Gold Standard’ Leads To World’s First Net-Zero Aligned Financial Centre

COP26 has acted as the catalyst for a plethora of recent governmental announcements which aim to facilitate the transition to a net-zero world economy. A key component of this transition falls at the hands of major corporations; developing science-based net-zero plans represents an important step in the process.

The UK Treasury has proposed rules which seek to ensure that corporate net-zero announcements go beyond a marketing output to developing a clear strategy on how the outlined target will be achieved. Under the proposed new rules, financial institutions and listed firms on the London Stock Exchange are required to develop and publish net-zero transition plans. A taskforce consisting of academics, industry leaders and regulators will be set up to develop a ‘gold standard’ as a benchmark for an ambitious and clearly outlined net-zero plan.

There are still significant areas of the proposal which need further clarity: What will the taskforce’s definition of ‘gold standard’ be? Will this truly be mandatory or introduced using the ineffective ‘comply or explain’ methodology? How will bank loans to ‘dirty’ industries be treated under the proposed plan?

Irrespective of these questions, one thing is for certain, policy makers are taking steps in the right direction towards creating an environment conducive for corporates to be under the spotlight from stakeholders on ESG related matters – through the drive for transparency.

Firms are grappling with the ever-evolving ESG market – hence are seeking access to further granularity of ESG data and expert advice to navigate through the emerging ESG policy minefield – with each wrong turn having a significant material effect on stakeholder sentiment leading to a dampened listed share price.

The UK Treasury’s proposal will add to the ever-increasing ESG disclosure requests directed to corporates - further highlighting why the demand for adaptable ESG software and consultancy services is expected to continue to ramp up over the next 2 years. A Verdantix study found that 57% of firms expect a double digit increase in spending on sustainability initiatives in 2022 when compared to 2021.

As the ESG disclosure landscape takes shape across multiple jurisdictions, ESG software and consultancy firms must establish a competitive offering by the end of 2022 or risk being left behind wondering what might have been.  

Sam Renshaw

Industry Analyst

Sam is an Industry Analyst in the ESG & Sustainability practice. His current research agenda focuses on ESG solutions across financial markets including ESG information providers and sustainability consulting. Sam joined Verdantix in 2021, and previously worked at Moody’s Analytics as part of the Buy-Side Solutions team. He holds a BSc from The University of Nottingham in Economics and is a CFA Level 2 candidate.