Government to force big business to reveal green credentials

The government will force big businesses, large money managers and institutional investors to reveal their sustainability credentials under a fresh green reporting regime launched today.

Under the new rules, launched by the Treasury, every investment product must for the first time ever break down the environmental impact of the activities it funds.

Businesses will have to justify any sustainability claims generated from an investment, while money managers will need to tell investors how they are focusing on green investments in their strategy. 

The tougher regime is intended to clamp down on greenwashing, which can dupe customers into investing in a product they think has high sustainability credibility, but turns out to be environmentally damaging.

The government has also launched a rule book defining which economic activities count as green and which ones are damaging to the environment.

Chancellor Rishi Sunak said: “We are already a world leader in green finance, and today’s roadmap will give us the opportunity to set new global standards for sustainability that will boost the economy, protect the planet and support our net zero goals.”

“We want sustainability to be a key component of investment decisions, and our plans will arm investors with the right information to make more environmentally-led decisions.”

Improving environment, social and governance (ESG) disclosures is seen as a crucial step toward channeling funding into investment products that accelerate the UK’s drive toward a greener economy.

However, a lack of transparency and a myriad of ESG metrics often stops investors from making legitimate sustainable investments. The new sustainability disclosure requirements are designed to bridge these information gaps.

The Organisation for Economic Cooperation and Development recently slammed ESG investing for being toothless at tackling climate change due metrics used to measure an investment’s sustainability credentials often lacking clarity and transparency.

The Treasury estimates around 70 per cent of the UK public want their money to go towards making a positive difference to people or the planet.

Chris Cummings, chief executive of the Investment Association, said: “We are encouraged to see the emphasis on addressing the data gaps and the flow of sustainability information from investee companies through to investment managers and to consumers.”

“This supports the responsible allocation of capital and ensures that savers have clarity, confidence, and choice when investing.”