COP21: Carney could cause Treasury u-turn on GHG reporting

7th December 2015

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Dee Nunn

​High profile statements on the economic risks from climate change by Bank of England governor Mark Carney could mean government plans to remove carbon reporting requirements are scrapped.

On Friday, Carney launched the Task Force on Climate-related Financial Disclosures (TCFD) to develop voluntary, consistent climate-related financial risk disclosures by companies. This would provide lenders, insurers, investors and other stakeholders with important long-term information, he said.

The taskforce will be chaired by UN special envoy for climate change and former mayor of New York Michael Bloomberg. It will consider what constitutes effective corporate financial transparency on climate change to understand the physical, liability and transition risks, and will review and learn from existing disclosure processes.

Paul Simpson, chief executive of the CDP, which has been working on climate change-related disclosures for investors for 15 years, welcomed the announcement. "We see it as a way of elevating our work and some of the information we collect right into the heart of financial markets and central banks. Carney is governor of the Bank of England and chair of the Financial Stability Board so that's a much stronger angle into banks on climate than there's been before. It will take disclosures to the next level," he said.

Proposals by the Treasury to scrap regulations requiring companies to report greenhouse-gas emissions in their financial reports as part of its business energy efficiency tax review were very worrying, Simpson said. But these could now be under review following Carney's high-profile speech to the city and the creation of the taskforce, he added.

"I'm told that Carney's statements have had an influence on the Treasury, that they're having to rethink some of their plans to reduce or take away carbon reporting requirements.

"We very much hope that due to Carney's focus on this issue, Osborne and the Treasury will see sense and realise that investors need this information, in fact they need more information than just GHG emissions. We're hopeful that it will cause a u-turn from Osborne."

The CDP has been lobbying ministers and the Treasury to ensure that the regulation stays, he said.

The taskforce had been approved by the G20, Carney told delegates at its launch at the UNFCCC talks in Paris. "This will be a one-stop shop for the right principles around climate, so that there can be a true market in transition to a low-carbon market.

"There are a wide range of views among providers of capital about the urgency of the issue, the right technologies to back, and about which companies are doing better, but they don't have the right information to express those views. The taskforce will solve that market failure," he said.

The TCFD will comprise technical experts from firms that prepare and use company risk disclosures, as well as risk analysts. They will work to deliver specific recommendations for voluntary disclosure principles and practices by the end of 2016.

The CDP has also released a report on deforestation disclosure. It found that the number of investors requesting data about forest risks from companies had risen by 24%, with 70% of companies reporting pledges to address forest loss.

However, businesses are failing to meet their targets, with half of companies with commitments to source certified soy failing to get any into their supply chains. For palm oil, this figure is 26%, the CDP found.

Restoring degraded agricultural or forest land and protecting natural areas could reduce emissions by as much as 9.0Gt CO2e by 2030, according to a report by the New Climate Economy published at COP21.

Meanwhile, technical negotiators working on the draft text of a new global climate agreement concluded their work over the weekend. The number of options in the draft text that still need to be discussed and resolved has been cut from 1,685 to 939. The latest version includes potential compromises, known as bridging proposals, on critical issues like loss and damage and adaptation. These will be thrashed out between ministers over the coming week.

Campaigners praised progress one week in, comparing it favourably with progress made during the first week of the Copenhagen talks in 2009. Richard Black, director of the Energy and Climate Intelligence Unit, said: "The situation couldn't be more different from Copenhagen, when delegations were more interested in grandstanding than graft. You can never predict these things with certainty and countries are some way apart on issues such as finance, but the chances of securing an agreement next weekend now look pretty good."

Liz Gallagher, programme leader at E3G, commented that differences between the developed and developing world have become more nuanced around most issues, though she warned that finance remained a major issue. A report from the OECD, which attempted to aggregate climate finance provided so far, is causing particular tension, with developing countries unhappy that it counts loans as climate finance.

Marshall Islands foreign affairs minister Tony de Brum told delegates: "The $100 billion promise in Copenhagen is now tainted with what some feel is some creative accounting and a failure to prioritize assistance for the most vulnerable. This has continued to scratch away at the bonds of trust, and so our partners need to quickly put their finance cards on the table."

Other announcements over the weekend include:

- UN secretary general Ban Ki-Moon outlined ideas for accelerating investment in low-emission, climate resilient infrastructure in cities in the first report of the Cities Climate Finance Leadership Alliance (CCFLA). The alliance launched in 2014 and is a coalition of more than 40 banks, national governments and civil society organisations. Finance projects outlined in the report include a credit-trading facility in Washington DC, which provides participants with stormwater retention credits for exceeding regulatory requirements or investing in green roofs or other infrastructure projects to reduce stormwater runoff.

- A tool to help business develop the business case for investing in green infrastructure was launched by the World Business Council for Sustainable Development, the Nature Conservancy and engineering consultancy CH2M. It includes case studies from different industries leveraging various ecosystem services.

- Initiatives to reduce short-lived climate pollutants from freight, landfills and refridgeration were launched by governments and industry representatives in the Climate and Clean Air Coalition. Short-lived climate pollutants such as hydrofluorocarbons (HFCs), methane, black carbon and tropospheric ozone stay in the atmosphere for a shorter time than carbon dioxide, from a few days to a decade, but they have a global warming potential several times greater than CO2. The coalition is focusing on freight, landfills and refridgeration.


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