The G7 is making a big step towards climate transparency for businesses

The G7 countries have taken a big step towards obliging companies to disclose their climate risk, which they consider crucial for energy transition, even if there is still an agreement at the global level, despite the reservations of NGOs.

“We are in favor of mandatory publication of climate-related financial data, which provides reliable and useful information for market participants,” G7 Finance wrote in a press release at the end of the two-day meeting in London.

These mandatory declarations, which include, for example, CO2 emissions or investment projects, must apply to all large commercial companies.

They aim to enable them to better assess the financial impact of the climate crisis and to support the green transition of countries that want to be carbon neutral in 2050.

It is also important for investors who need to fund large groups and who are increasingly concerned about the impact of climate on companies, whether it is their performance or reputation.

US Treasury Secretary Janet Yellen (L) with Eurogroup President Paschal Donohoe at the G7 Finance in London, June 5, 2021 (POOL / AFP – Alberto Pezzali)

The G7 says it follows the recommendations of the Working Group on Climate-Related Financial Discoveries (TCFD), established in 2017 under the auspices of the G20.

Finance ministers have even gone further welcoming the creation of the TNFD (Working Group on Financial Discoveries Related to Nature), which no longer applies not only to climate but also to nature and biodiversity.

– Finance for nature? –

For WWF France, it is “an important signal that should enable this global initiative to mandate during the G20 summit next October,” provoking the need for “pro-nature funding”.

In the face of climate financial risks, the challenge is for each country to assume its responsibilities and impose a measure on its companies, and that there is agreement in developing common accounting rules.

The United Kingdom is setting an example, as it will force companies to make that impact public from 2025, making it the most advanced of the G20 in the area, according to the British government.

This is not yet mandatory at first, and companies in the country only need to publish this information or explain why they do not.

French Bank Governor François Villeroy de Galhau assessed it in an interview with the Financial Times on Wednesday that a global agreement for COP26 could be reached in Glasgow in November.

“Publication should be mandatory. It is the first step (…) No one expected six months ago that we would go so fast and that we could have a positive conclusion at COP26,” the daily business said.

– Exit from fossil fuels –

Investors themselves are urging the G7’s authority to do more, such as the British AI asset managers ’association, which is urging financial regulators to commit to making risk disclosure mandatory.

“Having quality, comparable data on business climate risks is critical to achieving carbon neutrality goals,” said Chris Cummings, CEO of AI.

For their part, NGOs warn that the measure alone does not guarantee that the business world will participate in the energy transition.

“Publications should have been mandatory a long time ago, but at this time of climate and environmental crisis the call for better data is a dangerous distraction,” said David Barmes of Positive Money. “Markets will not be saviors,” he warns.

According to him, G7 governments must first and foremost work with central banks and regulators “to really separate finance from fossil fuels”.

NGOs estimated in a report Wednesday that the G7 countries missed an opportunity to green their economic response to the health crisis by massively subsidizing polluting sectors, such as air transport, despite their climate commitments.

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