“We simply cannot achieve net carbon emissions until 2050 unless the financial sector knows what impact their investments will have on the climate,” Climate Change Minister James Shaw said in a statement. “This law will bring climate risks and resilience to the core of financial and business decision-making.”
The legislation requires financial firms to disclose how climate change affects their business, and explain how they will manage climate-related risks and opportunities. If the bill is passed, the first disclosure reports will be published by companies as early as 2023.
“The financial sector’s requirement to disclose the effects of climate change will help businesses identify the high-emission activities that pose a risk to their future prosperity,” Shaw said. ‘technologies. “
The latest action comes amid an increasing focus by governments and financial regulators on the climate exposure of banks and asset managers, forcing these businesses to rethink the projects they finance.
According to Ceres, which is not profitable, more than half of the syndicated loans from major US banks are in sectors of the economy that make them vulnerable to the risks posed by climate change. Syndicated loans are funded by a group of banks.
The European Central Bank said in November that it would start assessing from next year how the bank balance takes into account climate risks.
For example, banks will be expected to disclose how floods and storms could affect the value of their real estate portfolios and customer supply chains, and also take losses into account as businesses adjust their operations to be less carbon intensive.
In its November US Financial Stability Report, the US Federal Reserve directly addressed the effects of climate change for banks for the first time, saying that better disclosure could improve the price of climate risks and avoid the kind of sudden changes in asset prices that cause financial systems. shocks.