Climate change could shape future finance strategy

Government outlines plans to factor environment into business policy

The challenges of climate change could form a central part of the future business strategies in the financial sector under new measures announced by the British government on Tuesday.

City minister John Glen told a meeting of senior figures in the business world that they have a "vital role" to play in "securing a greener future for us all".

Measures to be introduced include the embedding of the topic of climate change in the curriculum for people studying for financial qualifications, a Green Finance Institute, and an expectation that companies should report climate change risks.

The Treasury, work alongside financial regulators "will explore the most effective way of doing this, including whether mandatory disclosures are necessary", added Glen.

The need for action on climate change is a rare example of agreement across the political spectrum in the UK, although the main parties do of course have different policies and views on how to deal with the issue.

Last week, Labour shadow chancellor John McDonnell said that should his party get into government, it would launch a review of the financial system "as it currently relates to the climate emergency", and hinted that any London-listed company that failed to buy into the idea could risk being delisted from the London Stock Exchange.

Ed Davey, who is one of the candidates to be the next leader of the Liberal Democrats, is well versed in the topic, having served as secretary of state for energy and climate change in the coalition government from 2012 to 2015.

The financial services sector has responded positively toward the latest government suggestions. A joint statement from the Bank of England's Prudential Regulation Authority, the Financial Conduct Authority, the Financial Reporting Council and the Pensions Regulator said climate change as "a defining issue of our time", with the chief executive of the Pensions Regulator, Charles Counsell, calling actions"no longer simply a social responsibility issue "but" a core financial risk impacting broadly across business".

Voluntary guidelines suggested by an international financial task force, which includes Bank of England Governor Mark Carney, are already in place.

Stephen Jones, the chief executive of UK Finance, the financial sector's trade association, said the finance industry backed the proposal to introduce a legal requirement to report climate change risk in any strategies by 2022, and also supported proposals to reduce carbon emissions to zero by 2050.

However, some of the suggested new measures may be more achievable than others. Ministers have already pledged five million pounds ($6.3 million) toward green mortgages, which would give homebuyers incentives to make their properties eco-friendly.

Mortgage experts have questioned how realistic that would be in such a competitive market, where loans are already at such low interest rates.