An efficient, resilient financial system requires identification, pricing and management of material risks. As pointed out by the 2017 G20 Green Finance Synthesis Report, environmental risks can be material, with financial impacts on a company’s revenues, expenditures, asset valuation and cost of financing. Put simply, better information about climate and environmental risks is a prerequisite to growing green financial markets.
In November 2020, the UK announced the commitment to make climate related disclosures mandatory across its economy by 2025, in a manner aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). Meanwhile, China announced its 2060 carbon neutrality goal in September 2020 and have incorporated climate change elements in its 14th Five-Year-Plan (2021-2025).
Harmonising disclosure standards, sharing well-established methodologies, metrics and target-setting for disclosure will be crucial to growing global green finance. The UK and China have an opportunity to set the bar for data and disclosure.
UK-China Climate and Environmental Information Disclosure Pilot
In December 2017, China and the UK agreed to launch joint TCFD pilot programme, in which 10 leading financial institutions would adopt TCFD recommendations and curate the practical lessons they learned for subsequent adopters, as an outcome of the 9th UK-China Economic and Financial Dialogue.
The main goals of the pilot are:
Since the announcement, pilot participants have met several times and, in the process, developed a joint three-year action plan. Each side is free to determine the details of their own plan, with the intention that each year will build on the last.
Currently, 13 Chinese and UK financial institutions have joined the pilot and received comprehensive guidance from the People’s Bank of China and Bank of England. Industrial and Commercial Bank of China (ICBC) and Principles for Responsible Investment (PRI), represent each side respectively, serve as co-chairs of the pilot steering committee.
Further details on the pilot’s progress and participant list can be found here.
This pilot is supported by the UK Department for Business Energy and Industry Strategy (BEIS)’s UK PACT programme.
Advancing the UK – China’s Green Finance agenda through disclosure and demand-led capacity building for both financial firms and listed companies
CDP, with support from the BEIS ICF Technical Assistance Program, is working to support and incentivize China’s transition to a more environmentally sustainable growth model by employing green finance strategies. CDP is working with regulators in china, and investors and companies to integrate actions and explore synergies between the components of the financial system, resulting in better disclosure of their ESG impact.