UK government consults on mandatory transition plans for insurers

By Rebecca Delaney

June 26 - (The Insurer) - The UK government has launched a consultation on proposals to mandate the development and implementation of "credible" transition plans for UK-regulated financial institutions, including insurers.

The consultation was launched on Wednesday by the Department for Energy Security and Net Zero.

The requirement to implement credible transition plans that align with the 1.5 degree Celsius goal of the Paris Agreement would apply to insurers, banks, asset managers and pension funds, as well as FTSE 100 companies.

Currently, firms are required to report against climate-related disclosure rules introduced in 2022.

"Reflecting significant international developments in recent years, the government is considering how to build on those requirements to create an enhanced regime for sustainability-related financial disclosures that is fit for the future," said the government.

It underlined the importance of providing investors with "rigorous and comparable" financial information regarding the future prospects of the companies in which they invest, including sustainability-related risks and opportunities.

"A strong sustainable finance policy framework – including transition plan requirements – is critical to driving transparency in financial markets and investment into the sectors that are crucial to meeting our carbon budgets, ensuring there is resilience to a warming climate, and reversing the decline of nature," said the government.

"It also provides a huge opportunity to support economic growth both through the financial services sector and by supporting capital allocation into clean energy and transitioning industries."

A second consultation invites views on the exposure drafts of UK Sustainability Reporting Standards, based on the work of the International Sustainability Standards Board to promote international comparability.

A third consultation seeks views on proposals to introduce a registration regime operated by the Audit, Reporting and Governance Authority to provide assurance over sustainability-related financial disclosures.

The consultation will run until September 17.