The realisation of the government's Net Zero agenda on carbon needs to be driven forward not only by measures targeted directly at the 'on-the-ground' operations of carbon-producing industries but also by harnessing and shaping the demands of investors.
We are seeing an ever increasing appetite for investment decision-making which looks at environmental, social and governance (ESG) factors - including climate change impact and resilience - to assess prospects and monitor asset performance. This flows not just from the "Blue Planet effect" on a public that has increasingly awareness of climate change but also from a recognition amongst investors that well-run businesses which manage climate change risks are more likely to be better prepared to survive and thrive in an uncertain future.
Corporate disclosure and transparency requirements are a key regulatory tool both for driving up companies' green credentials and for facilitating ESG-informed decisions by investors.
KPMG's recently published report on trends in ESG disclosures is an interesting read which highlights the growing body of non-financial reporting requirements relating to ESG factors which is emerging on a global level.
This trend for corporate environmental transparency is being borne out in the UK. Lip-service to green practices through publication of an occasional corporate responsibility good news story no longer cuts it.
Company directors have, since the start of this year, been legally required to make an annual statement that they have taken into account the impact of the company's operations on the environment in discharging their duties. From 1 October, trustees of many occupational pension schemes have to include their stance on ESG factors in their statements of investments principles. And just in the last week the Financial Reporting Council (FRC) published a "greened" UK stewardship code to require signatories (which include both asset managers and owners) to take ESG factors into account from January 2020.
The release of the government's Green Finance Strategy in the summer indicated that mandatory climate disclosure requirements to align with the recommendations of the global Task Force on Climate-related Financial Disclosures are likely to be coming to the UK. With Net Zero ambitions front and centre, this seems an ever more likely reality.
Around the globe, voices clamoring for climate-aware investing and carbon controls are increasing.