“We simply cannot reach net carbon emissions by 2050 unless the financial sector knows what impact its investments have on climate,” Climate Change Minister James Shaw said in a statement. “This law will bring climate risks and resilience to the heart of financial and business decision-making.”
The legislation would require financial companies to disclose how climate change affects their business and explain how they will manage climate-related risks and opportunities. If the bill is passed, the first news releases would be published by companies as early as 2023.
“Requiring the financial sector to disclose the impacts of climate change will help companies identify high-emission activities that pose a risk to their future prosperity,” Shaw said, “as well as the opportunities they present. actions on climate change and new low-carbon technologies “.
The latest action comes amid a growing focus by governments and financial regulators on climate exposures of banks and asset managers, forcing these companies to rethink the projects they fund.
According to Ceres, a non-profit, for sustainability, more than half of the syndicated loans of major US banks are in sectors of the economy that make them vulnerable to the risks of climate change. The syndicated loans are financed by a group of banks.
The European Central Bank said in November that it will begin assessing how bank balance sheets explain climate risks starting next year.
For example, banks are expected to disclose how floods and storms could affect the value of their real estate portfolios and customer supply chains, as well as take into account losses that could occur if companies they adjust their operations to less carbon consumption.
In its November financial stability report, the U.S. Federal Reserve directly addressed the implications of climate change for banks for the first time, saying better disclosure could improve the price of climate risks and prevent the rate of change. sudden spikes in asset prices that cause the financial system. shocks.