Recommendation 2

HM Government Rejected

The Government does not agree with this recommendation. Global best practice on sustainability investment reporting requires co-operation and leadership from a range of stakeholders across countries. At COP26, the Government announced the UK will be the world’s first Net Zero-aligned Financial Sector. This means UK financial institutions having a robust firm-level transition plan setting out how they will decarbonise as the UK meets its ambitious and legally binding net zero targets.6 To support this work the Government will set up a high-level Transition Plan Taskforce to establish a best practice standard for transition plans.7 The UK has also worked as chair of the G7, and in partnership with other G20 countries, to ensure all economic and financial decisions take the risks of climate change into account. The UK has convened over 30 advanced and developing countries from across 6 continents. This represents over 70% of global GDP to back the creation of a new global climate reporting standard by the International Financial Reporting Standards (IFRS) Foundation to give investors the information they need to reach net zero.8 At COP26, the IFRS Foundation announced the establishment of an International Sustainability Standards Board (ISSB) to develop comprehensive global baseline sustainability disclosure standards to meet investor need for financial relevant sustainability information.9 Along with 40 international partners, the UK Government welcomed the establishment of the ISSB and its work to develop internationally consistent standards for the disclosure of sustainability-related information.10 4 Secretary of State issues rallying cry at COP26 - GOV.UK (www.gov.uk) 5 Greening Finance: A Roadmap to Sustainable Investing (publishing.service.gov.uk) 6 Fact Sheet: Net Zero-aligned Financial Centre - GOV.UK (www.gov.uk) 7 Chancellor: UK will be the world’s first net zero financial centre - GOV.UK (www.gov.uk) 8 Chancellor: UK will be the world’s first net zero financial centre - GOV.UK (www.gov.uk) 9 IFRS - IFRS Foundation announces International Sustainability Standards Board, consolidation with CDSB and VRF, and publication of prototype disclosure requirements. 10 UK welcomes work to develop global sustainability reporting standards alongside 40 international partners - GOV.UK (www.gov.uk) Government Response: Pension stewardship and COP26 3 The proposed SDR regime, developed by HMT, the Department for Business, Energy & Industrial Strategy and the Department for Work and Pensions, details the Government’s next step in putting the UK’s finance sector in a better position to achieve the goals of the Paris Agreement. As highlighted in response to recommendation 1, the SDR will create a reporting framework that brings together existing sustainability-related disclosure requirements under one integrated framework and will go further with new requirements.11 It will cover corporates, asset managers, asset owners and investment products.12 It is the Government’s aim for SDR to be an integrated regime that works smoothly across all sectors of the economy. Regulators and Government departments will determine the scope and timing of the requirements and reporting details. HM Treasury will coordinate the sectoral approaches centrally to ensure that the right information is made available across the investment chain.13