United Kingdom to issue nation’s first ever Sovereign Green Bond
Chancellor of the Exchequer, Rishi Sunak, has announced the UK Government will be issuing the nation’s first ever Sovereign Green Bond, becoming the first country in the world to make Task Force on Climate-related Financial Disclosures (TCFD) aligned disclosures mandatory.
Recognising that financial services are a critical enabler in the drive for net zero, the Chancellor outlined new proposals to support sustainable financial flows and extend the UK’s global leadership in green finance ahead of hosting COP26.
To help the UK meet its 2050 net zero target and other environmental objectives, the government will issue its first Sovereign Green Bond in 2021 subject to market conditions – and intends to follow up with a series of further issuances to meet growing investor demand for these instruments. These bonds will help finance projects that will tackle climate change, finance much-needed infrastructure investment and create green jobs across the country.
The Chancellor also announced the introduction of more robust environmental disclosure standards so that investors and businesses can better understand the material financial impacts of their exposure to climate change, price climate-related risks more accurately, and support the greening of the UK economy.
The UK will become the first country in the world to make TCFD-aligned disclosures fully mandatory across the economy by 2025, going beyond the “comply or explain” approach.
The joint Government Regulator TCFD Taskforce will on Tuesday, November 10, 2020 publish its interim report with a roadmap for implementing mandatory disclosures, many of which will come into force by 2023. The upcoming rules and regulations will capture a significant portion of the economy including listed commercial companies, UK-registered large private companies, banks, building societies, insurance companies, UK-authorised asset managers, life insurers, FCA-regulated pension schemes and occupational pension schemes.
Sunak said: “We are starting a new chapter in the history of financial services and renewing the UK’s position as the world’s pre-eminent financial centre. By taking as many equivalence decisions as we can in the absence of clarity from the EU, we’re doing what’s right for the UK and providing firms with certainty and stability.
“Our plans will ensure the UK moves forward as an open, attractive and well-regulated market, and continues to lead the world in pioneering new technologies and shifting finance towards a net zero future.”
The UK will also implement a green taxonomy – a common framework for determining which activities can be defined as environmentally sustainable – which will improve understanding of the impact of firms’ activities and investments on the environment and support our transition to a sustainable economy.
The UK taxonomy will take the scientific metrics in the EU taxonomy as its basis and a UK Green Technical Advisory Group will be established to review these metrics to ensure they are right for the UK market.