The Department for Business, Energy and Industrial Strategy (BEIS) has published the final report Mission Zero: Independent review of net zero (Review).
The lengthy Review runs to 340 pages and makes 129 recommendations, with short, medium and long-term actions, and is split into two parts:
- Part 1 explains the opportunity and benefits to individuals and the economy. It places domestic action in an international context and emphasises that the UK must go further and faster to realise the economic benefits of net zero.
- Part 2 sets out how to achieve the opportunity of net zero across six pillars: Securing net zero; Powering net zero; Net zero and the economy; Net zero and the community; Net zero and the individual; and Net zero and the future. It makes recommendations to catalyse action in individual sectors of the economy, and to enhance the role of local authorities, communities and individuals to deliver net zero.
This update highlights some of the key takeaways from a corporate and corporate governance perspective.
What’s on the horizon for boards of UK companies?
The Review’s recommendations that will be of interest to those following corporate and corporate governance developments in relation to ESG include the following.
Pillar 1: securing net zero
- Implement the International Sustainability Standards Board (ISSB) standards as soon as they are published. The UK should aim for 2024-25 as the first sustainability reporting cycle for companies in scope, encouraging companies to apply the ISSB's standards voluntarily in 2023-24. This will build on Taskforce for Climate-Related Financial Disclosures (TCFD) initiatives.
- Make the UK Transition Plan Taskforce (TPT) standards mandatory for both listed and private firms, once more developed, to ensure comparable disclosure standards across the economy.
- Update the UK Stewardship Code for institutional investors as part of its review at the end of 2023 to explicitly reflect the need to take sustainability and the transition into account.
- Consider the appropriateness of a transition taxonomy (alongside a UK green taxonomy) that is simple and proportionate.
Pillar 3: net zero and the economy
- Review how the UK can become the most competitive financial centre for green and transition listings, capital raising and project financing. The government and FCA should take the opportunity of the ongoing reform of the prospectus and listing regimes to review the rules to encourage integrity and growth in the market for green finance instruments, with the aim of supporting the net zero transition. This should include working with issuers, their advisers and market participants such as exchanges and venues (including the role of the London Stock Exchange).
- In updating the Green Finance Strategy in 2023, set out a clear, robust and ambitious approach to disclosure, standard setting, and scaling up green finance. This should set out how the government will meet the existing commitments to implement Sustainable Disclosure Requirements across the economy.
Pillar 6: net zero and the future
The report discusses standards for voluntary carbon markets.
What next?
The majority of the above recommendations will not come as a surprise to UK corporates, and indeed a number of them are already being progressed. The recommendations highlight that, if implemented by the government, private as well as listed companies will have to navigate an increasing amount of government policy and regulation in terms of ESG and climate-related reporting.
Further reading
