The green finance taskforce, set up by the government last year and chaired by finance expert and former Lord Mayor of the City of London Sir Roger Gifford, has worked with over 140 organisations across the finance and energy sector to produce recommendations about the policy changes needed to make green finance an integral part of the financial system.

These include encouraging companies to use the TCFD framework to develop their financial, corporate governance and stewardship disclosures. The taskforce says the government should conduct a review of disclosure in 2020 to monitor and encourage market adoption amongst both issuers and users.

In addition, financial regulators should integrate the TCFD recommendations throughout the existing UK corporate governance and reporting framework. The group also says the government and financial regulators must clarify in their guidelines that disclosing material environmental risks, including physical and transition climate-related risks, is already mandatory under existing law and practice.

The report states: ‘There must be a comprehensive effort by the government and relevant regulators to support successful adoption, implementation, and enforcement of the TCFD recommendations, such as through public rankings, off-the shelf tools and scenarios, and publicly available datasets.’

Other recommendations include establishing a sovereign green bond, boosting investment into clean technologies, and driving demand and supply for green lending products. The report also suggests that the creation of a new Green Finance Institute will act as a ‘one-stop-shop’ for all work relating to the sector – from international engagement to green fintech, climate and data science.

Sir Roger Gifford, green finance taskforce chair, said: ‘This report marks a significant starting point for truly propelling green finance onto the national agenda. We look forward to engaging with Government closely on this in the short and long-term future.’

Alice Garton, finance lawyer with pressure group ClientEarth, said: ‘Following the TCFD recommendations will promote good corporate governance and helps company directors and investors comply with their legal duties. It is currently the best way to avoid future litigation or regulatory action for failing to properly consider climate risks to the business.

‘The UK government and regulators need to produce guidelines on climate disclosure for businesses and investors, so they are better equipped to protect themselves and the economy from the growing risks presented by climate change.’

Alongside the release of the recommendations, the environmental audit committee has called on financial regulators themselves to report on how they are adapting to climate change.

The committee has written to Defra secretary Michael Gove calling for him to use powers under the Climate Change Act to formally require the Pensions Regulator (TPR), Financial Conduct Authority (FCA) and Financial Reporting Council (FRC) to produce climate adaptation reports.

Mary Creagh, chair of the environmental audit committee, said: ‘Amongst financial regulators in the UK, only the Bank of England and its Prudential Regulation Authority have given the issue serious attention. There is a compelling case for the UK’s other regulators to use the opportunity of the current adaptation reporting round to integrate climate change risk management into their work.’

MPs said the FRC should be monitoring how companies disclose climate-related risks in their annual reports, while there is a strong case for both TPR and FCA to integrate climate change risk management into their work given the long time-scales involved in pension saving.

The committee said the FCA in particular needs to do more to demonstrate that it is addressing these risks, given its lack of guidance to contract based pension schemes on environmental risks and the limitations of its risk outlook on climate change.

Accelerating green finance is here.

Environmental audit committee letter is here.

Report by Pat Sweet