Ministers made a last-minute decision to withdraw plans to force big UK companies and asset managers to disclose their environmental impact from Tuesday’s Queen’s Speech, according to government sources.
The decision to drop the “sustainability disclosure requirements” from a new financial services bill comes amid a wider retreat by the government from tightening corporate governance.
Other postponed measures — partly at the behest of David Canzini, deputy chief of staff in Downing Street — included audit reforms, stronger powers for the internet regulator and the regulation of professional football.
The Treasury said it “remained committed to implementing sustainability disclosure requirement and will proceed with the necessary legislation in due course”.
Chancellor Rishi Sunak announced in October that larger UK companies, investment groups and pension schemes would have to start disclosing the environmental impact of their activities.
The SDRs will force companies to justify their sustainability claims “clearly” while setting out their transition plans to help meet Britain’s target of becoming net zero carbon by 2050.
They will cover disclosure rules for investment products, asset managers and owners, and listed companies.
The government has said it would allow those corporate reporting standards to be set in conjunction with the International Financial Reporting Standards Foundation, an international body which is drawing up its own climate-related standard.
While ministers never announced that the SDRs legislation would be in the financial services bill, or the wider Queen’s Speech, they had privately hoped to do so until late last week.
One aide said there had been a last-minute U-turn: “I would see this in the context of Downing Street not wanting to impose new regulations on business at this stage.”
Canzini, who is said to have strong free market instincts, has told aides to drop or postpone policies which could be seen as “unConservative” in order to differentiate the party from Labour.
Government officials said “the best vehicle for delivering” SDRs had yet to be decided.
They said the financial services bill was already a heavy piece of legislation which could be bogged down in parliament if it had become even lengthier.
Officials pointed out that progress was still taking place under the auspices of the Department for Business, Energy and Industrial Strategy and the Financial Conduct Authority, for example in moving towards mandatory transition planning disclosures for financial firms. However, they confirmed legislation would eventually be needed for the new system.
The government’s Transition Plan Taskforce will create the framework under which companies must disclose their plans for transitioning to net zero. It issued a call for evidence this week.
Ed Miliband, shadow energy secretary, said the government was stepping away from its commitments only six months after it hosted the COP26 global climate talks in Glasgow. “The government going backwards on this is the wrong choice and holds back UK’s — and the global — green transition.”
Heather McKay, policy adviser for sustainable finance at the think-tank E3G, said the Queen’s Speech had been “a bit of a damp squib” for tackling climate change.
“There was a real potential with the financial services bill to underpin that green economic firework display of innovation around how we manage climate risk in the UK.”
The Treasury insisted the UK was still in the vanguard of efforts to ensure corporate environmental disclosure.
“The UK was the first major economy to commit to mandatory climate reporting and we have made good on that commitment by establishing a full regime this year,” the department said. “Today, we also launched a call for evidence to develop the gold standard for transition planning, helping to deliver our ambition to make the UK the world’s first net zero aligned financial centre.”