Recommendation 69

HM Government · verbatim extract Deferred

(30a) The Task Force on Nature-related Financial Disclosures (TFND) framework is scheduled to be ready for launch and uptake by the end of 2023. The framework won’t just focus on disclosures, but rather, as a critical first step, empower and enable institutions to understand, act and report on their evolving nature related risks. The government will work with the TNFD and will carefully review their recommendations and potential policy/regulatory responses when they are available. This includes ensuring there are links to the CBD Post 2020 Global Biodiversity Framework, requirements in the Environment Bill on biodiversity net gain, and the UK green taxonomy in order to signpost to the private sector the financial and environmental imperative of incorporating nature-related risks into risk analysis and decision making. (30b) The Government is committed to ensuring the private sector plays a significant role in the delivery of the UK’s net zero target and ambition to leave the natural environment protected and enhanced for the future. In line with this ambition, and in response to the Dasgupta Review, the Government has committed to delivering a ‘nature positive’ future and to including a requirement in the Environment Bill to set a new legally-binding target to halt the decline in species abundance by 2030. The Chancellor used his Mansion House speech 2021 to announce new economy- wide Sustainability Disclosure Requirements (SDR) for real-economy corporates, financial services firms, and pension schemes to disclose their impact on the climate and the environment - and the risks and opportunities these pose to their business. A key component of this will be disclosures against the UK green taxonomy, which will establish a common and transparent definition for which economic activities count as environmentally sustainable. The Government supports the development of global sustainability disclosure standards, including the work of the International Financial Reporting Standards Foundation to create a global baseline corporate reporting standard for sustainability. In recognition of rising private sector interest and action on the financial materiality of nature-related considerations, in its 2019 Green Finance Strategy, the Government committed to working with international partners to catalyse a market-led coalition on nature-related financial risks and reporting. Supported by the Government from its inception, TNFD will provide a framework for corporates and financial institutions to report and act on evolving nature- related risks in order to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes (30c) As set out in the Bank of England’s recent response (https://www.bankofengland.co.uk/ letter/2021/july/remit-for-the-fpc-2021) to the updated remit and recommendations of the Financial Policy Committee (FPC), the FPC will explore the potential relevance of other environmental risks to its primary objective. This work will consider whether environmental risks beyond those related directly to climate change can create financial risks that, left unaddressed, could pose a threat to UK financial stability. It will also take into account evidence from existing literature such as The Dasgupta Review. (30d) the UK Infrastructure Bank. The government announced in the Policy Design document at Spring Budget 2021 that the Bank’s core objectives are to help tackle climate change, particularly meeting our net zero emissions target by 2050, and to support regional and local economic growth through better connectedness, opportunities for new jobs and higher levels of productivity. The government has also committed to reviewing the case for broadening the Bank’s environmental objectives, such as improving the UK’s natural capital, before bringing forward legislation to put the Bank on a statutory footing. (30e) Government does not intend to request a further review from the Law Commission. consultation with academics, law firms and investors, the Law Commission reached the conclusion in their 2014 report that investment fiduciaries have a duty to consider all financially material risks and opportunities, whatever their source. They considered the subject again as part of their review of Pension Funds and Social Investment in 2017 and their conclusions were unchanged. We are aware of no subsequent case law since that date which would lead the Law Commission to a different outcome. Whilst the Law Commission did not opine on the materiality of financial risks relating to climate change or to nature, we believe biodiversity will typically be a financially material risk to most if not all investment portfolios, just as climate change is. As the Committee itself acknowledged, the financial system has undergone a transformation to integrate climate-related financial risks, and it has done so within the existing fiduciary duty framework. Government has already put the first st