Draft Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021

Robert Goodwill Excerpts

Wednesday 15th December 2021 General Committees

[The Minister for Energy, Clean Growth and Climate Change (Greg Hands)]

I beg to move,

That the Committee has considered the draft Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021.

The regulations were laid before the House on 28 October 2021. They will amend the Companies Act 2006 to require certain publicly quoted and large private companies to include in their annual reports disclosures in line with the international framework for climate reporting developed by the Taskforce on Climate-related Financial Disclosures.

Climate change is the biggest challenge of our time, both to society and to the economy. Internationally the Government are taking a leading role to promote action through our presidency of the United Nations COP26, and domestically we are working to deliver the UK’s world-leading target of net zero greenhouse gas emissions by 2050. The Government have published our net zero strategy, which sets out the measures to transition to a green and sustainable future. To support the transition to net zero, it is important that economically significant companies assess, disclose and act to manage climate-related risks and opportunities. Without an accurate assessment of climate risks by companies, it will be impossible to assess what action is needed to address them. Information from those assessments should be taken into account in the business model and strategy of every company to create more climate-resilient businesses. It should also form a key part of all investment decisions.

Some large UK companies are already reporting on climate risks, but to date those disclosures have been variable in both quality and quantity. The inconsistency makes it very difficult for investors to compare opportunities and risks across companies, let alone across markets. Many organisations are also not making the fuller disclosures that are needed to inform business risk and investment decisions.

[Mr Robert Goodwill (Scarborough and Whitby) (Con)]

From listening to the Minister, I understand that we are talking about general statements about risks and opportunities, not about accounting for the carbon dioxide or other greenhouse gases produced in the same way as businesses produce business accounts for currency.

[Greg Hands]

This is a qualitative assessment done by the 1,300 largest companies in this country—those with more than 500 employees—of how they see the risks and opportunities of climate change, to help their own company planning and also help investors looking at particular companies and across sectors. At this stage, the idea is to have a qualitative assessment from each company in its annual report. Producing annual reports is part of an established process.

[Mr Goodwill]

Does the Minister think that in due course we might see a carbon balance sheet where companies have detailed information, so we would be able to tell exactly where they were in terms of their own net zero targets?

[Greg Hands]

We already have a separate reporting regime in place for that—streamlined energy and carbon reporting. I think my right hon. Friend is a member of the Environmental Audit Committee, which takes a keen interest in these matters. I refer him to that separate reporting stream, which might satisfy some of his rightful craving for more information.