U.K. May Water Down Green Reporting Rules in Osborne's Budget

Companies that favor mandatory environmental reporting are concerned Chancellor of the Exchequer George Osborne will loosen the rules in the U.K. when he presents his annual budget statement to Parliament on Wednesday.

Osborne may end a requirement for greenhouse-gas reporting for Britain’s biggest companies after fellow Conservative Party leaders said the rules were onerous and led to job losses. Some of the U.K.’s biggest companies are stepping forward to defend the reporting standards, which were instituted in 2013 and intended to help them tackle climate change.

“Our support for retention of the current standards is based on hard business logic,” said Steve Waygood, the chief responsible investment officer at Aviva Investors. “Given the successful climate conference in Paris last year, removing it now would send the wrong message to the market, and to the international community.”

Aviva joined nine British businesses, including BT Group Plc and Sky Plc, that called for reporting requirements to be maintained because they boost efficiency and productivity. The government has been reviewing requirements since September in a bid to cut environmental red tape. House of Commons leader Chris Grayling said last week the current reporting requirements lead to less employment.

Loosening the rules would put Osborne into conflict with Bank of England Governor Mark Carney, who has backed a global effort to bring greater transparency to the way companies disclose the risks they face from climate change. He appointed former New York City Mayor Michael Bloomberg to lead a panel to draw up reporting standards, whose members include Waygood. Bloomberg is the owner of Bloomberg LP, the parent company of Bloomberg News.

Treasury officials couldn’t immediately be reached for comment.

Concern that companies shift production to locations with softer environmental policies was addressed last week in a report by the Paris-based Organization for Economic Cooperation and Development. The OECD concluded that stringent environmental policies can boost industrial innovation without diverting trade to less regulated markets.

Social and governance standards “create value over the long term for us as an investor,” Waygood said. He called for “consistent and transparent data in order to make the right investment decisions” from the U.K. government.

“Enhanced disclosure of strategic portfolio resilience to climate change should become the ‘new normal’ for exposed companies,” said Bruce Duguid of Hermes Fund Managers Ltd., which is working with Anglo American Plc’s board of directors to encourage reporting. Anglo’s board supports disclosing information showing how its business could be impacted by the shift to a green economy, according to a Hermes note issued Monday.

Other elements of the budget that could impact renewable energy include:

  • Carbon floor pricing: the budget is expected to extend a freeze after 2018, according to Nick Molho, chief executive of the Aldersgate Group, a group that represents businesses pursuing low-carbon investments.
  • Offshore wind: the budget may provide clarity on how and when the government will fund three planned auctions for new offshore wind projects, according to Molho.
  • Solar Energy: the budget may raise retail photovoltaic panels costs after the European Court of Justice ordered the U.K. to increase solar panels VAT to 20 percent from 5 percent, according Solar Trade Association.
  • Tidal Lagoons: the budget could boost the tidal-power industry by funding a feasibility studying to weigh construction of as many as six giant lagoons off of U.K. shores, the Sunday Times reported.

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