he Government has announced it will adopt internationally-approved sustainability standards to help crack down on corporate greenwashing and bolster London as a global financial centre.
In a statement on Wednesday, the Department for Business and Trade said the UK’s disclosure standards will set out rules on how companies share their sustainability-related risks and opportunities.
It said the rules will be based on those published last month by the International Sustainability Standards Board (ISSB) – a group set up at Cop27 to set global rules on climate reporting.
Under the rules, firms face more pressure to publicly disclose their impact on the climate including on their Scope 3 emissions – which covers the products or services that they sell.
The ISSB said the aim is to establish a common global language in which companies report their impact, to improve trust in climate reporting and to help to inform investors about sustainability-related risks and opportunities.
The Government said Business Secretary Kemi Badenoch will consider endorsing the international standards to create the UK Sustainability Disclosure Standards (SDS) by July 2024.
It added that the UK standards will only divert from the global baseline “if absolutely necessary for UK specific matters”.
The Financial Conduct Authority (FCA) will oversee disclosures from UK-listed companies while the Government will oversee them for UK registered companies and limited liability partnerships.
The UK has been instrumental in paving the way for sustainability reporting for investors and advising on the development of ISSB standards
The Department for Business and Trade said the aim is for the information that companies disclose “to be globally comparable and decision-useful for investors”.
It will also help investors compare information between companies, support the efficient allocation of capital and the smooth running of the UK’s capital markets, the department said.
The Policy and Implementation Committee (PIC), which includes the Bank of England, the FCA, the Financial Reporting Council and the Treasury, is providing advice on an endorsement decision to the Business Secretary.
The UK is among several countries, including Canada, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya and South Africa, to consider endorsing the global standards, according to the ISSB.
The London Stock Exchange and the FCA have both welcomed the new standards.
ISSB chair Emmanuel Faber previously told the PA news agency: “We have been really encouraged by the number of jurisdictions that have already indicated they will consider adoption.
“The UK has been instrumental in paving the way for sustainability reporting for investors and advising on the development of ISSB standards.
“We launched our standards today at the market opening of the London Stock Exchange, as well as at other exchanges around the world, and we have been in close dialogue with the UK FCA which is highly supportive of our objective to establish a common language for investors globally.”
The ISSB is part of the independent International Financial Reporting Standards Foundation, which writes standardised accounting rules used in about 140 countries.
It says the new rules on sustainability-related reporting can be released alongside firms’ annual financial reports.