Government sources said ministers made a last-minute decision to withdraw plans to force major British companies and wealth managers to disclose their environmental impact from the Queen’s speech on Tuesday.
The decision to remove “sustainability disclosure requirements” from a new financial services law comes amid a broader government retreat from tightening corporate governance.
Other postponed measures – partly at the behest of Downing Street deputy chief of staff David Canzini – included auditing reforms, stronger powers for the internet regulator and regulation of professional football.
The Treasury said it “remains on the implementation of the sustainability disclosure requirement and will proceed with the necessary legislation in due course.”
Chancellor Rishi Sunak announced in October that major UK companies, investment groups and pension funds would have to start disclosing the environmental impact of their activities.
The SDRs will force companies to “clearly” justify their sustainability claims as they set out their transition plans to help meet the UK’s target of net-zero carbon emissions by 2050.
They will include disclosure requirements for investment products, asset managers and owners, and listed companies.
The government has said it would allow these corporate reporting standards to be set in collaboration with the International Financial Reporting Standards Foundation, an international organization that creates its own climate-related standards.
While ministers never announced the SDR legislation would be included in the Financial Services Act or the broader Queen’s Speech, they had privately hoped for it until late last week.
One adviser said there had been a last-minute U-turn: “I would see this in the context of Downing Street not wanting to impose new rules on companies at this stage.”
Canzini, who is said to have strong free-market instincts, has told aides to drop or delay measures that could be seen as “unconservative” in order to distinguish the party from Labour.
Government officials said “the best vehicle for delivery” of SDRs has yet to be decided.
They said the Financial Services Act was already a heavy bill that could get stuck in Parliament if it got longer.
Officials noted that progress was still being made under the auspices of the Department for Business, Energy and Industrial Strategy and the Financial Conduct Authority, such as moving towards mandatory transition planning disclosures for financial firms. However, they confirmed that the new system would eventually require legislation.
The government’s Transition Plan Taskforce will provide the framework under which companies must disclose their plans for the transition to net zero. She issued a call for evidence this week.
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Ed Miliband, secretary for shadow energy, said the government was backing away from its commitments just six months after hosting the COP26 global climate talks in Glasgow. “For the government to backtrack on this is the wrong choice and is slowing down Britain’s – and the global – green transition.”
Heather McKay, policy adviser on sustainable finance at think tank E3G, said the Queen’s speech was “a bit of a wet cracker” for tackling climate change.
“There was real potential with the Financial Services Act to underpin this green economic firework of innovation in how we manage climate risk in the UK.”
The Treasury insisted the UK was still at the forefront of efforts to ensure corporate environmental disclosure.
“Britain was the first major economy to commit to mandatory climate reporting and we have met that commitment by introducing a full regime this year,” the ministry said. “Today we also launched a call for evidence to develop the gold standard for transition planning to help meet our goal of making the UK the world’s first net-zero financial centre.”