Most big UK firms and financial institutions will be forced to show how they intend to hit climate change targets, under proposed Treasury rules.
By 2023, they must have thorough public plans in place for how they will transition to a low-carbon future, in accordance with the UK's net-zero aim of 2050. An experienced group will review the plans to ensure they are not merely spin. However, net-zero promises will not be required, and environmentalists argue that the measures do not go far enough.
Firms and their shareholders will be free to determine how to adapt their operations to this transition, including how to decarbonize the emissions they fund.
Chancellor Rishi Sunak will lay out the plan to create the UK the first net-zero financial centre on the third day of the COP26 climate meeting in Glasgow.
As part of a day dedicated to finance, he will speak to a group of finance ministers, central bank governors, heads of international financial organisations, and top business leaders.
The chancellor will also declare that 450 companies representing 40% of global financial assets, worth $130 trillion (£95 trillion), have joined forces to keep global warming to 1.5 degrees Celsius over pre-industrial levels.
'Not Fast Enough'
The purpose was good, but financial corporations were nonetheless "pouring billions into ecologically destructive projects," according to David Barmes, senior economist of the campaign organisation Positive Money.
"Rather than bank CEOs establishing norms and delivering green investment, we need public institutions to lead the way."
The International Rescue Committee's president, David Miliband, stressed the need of getting good value for money:
"Writing cheques is the easy part and spending the money well is much, much tougher."
Shaun Spiers, executive director of environmental think tank Green Alliance, said that more UK public sector funding was needed.
"Private sector investment is vital, but it will be much easier to achieve on the back of serious investment by the chancellor," he said.
More than $130 trillion (£95 trillion) of private money "is now committed to changing the economy towards net zero," according to the Glasgow Financial Alliance for Net Zero (GFANZ), which is led by former Bank of England Governor Mark Carney.
In reality, this implies that bank loans that might otherwise be sent to an oil field or a coal mine are instead directed to renewable energy or a mortgage product that subsidises energy-efficient dwellings.
Transition Plans
Financial institutions and corporations with shares listed on the London Stock Exchange are required to develop net-zero transition plans, which will be published beginning in 2023, under new Treasury guidelines.
The strategies must contain targets for reducing greenhouse gas emissions as well as the activities that companies intend to take to achieve those goals.
The government will also establish a taskforce comprised of industry executives, academics, regulators, and civil society organisations.
It would establish a science-based "gold standard" for the plans to prevent "greenwashing," or environmental measures that are more about marketing than substance.
However, the government said there was "not yet a commonly agreed standard for what a good quality transition plan looks like".
Climate Summit
Natwest's chief executive, Alison Rose, told BBC Radio 4 Today that the bank has begun tracking emissions on its balance sheet to assist it measure progress, and that "transparency was vital."
"We're working with the oil and gas sector to build realistic transition plans so we can measure progress and engage with our customers," she added.
Ms. Rose, on the other hand, said the organization's major focus was on assisting small businesses with "genuine commercial potential" in "adopting sustainable supply chain and sustainable business practises."
"It is brave to put a gold standard in place for all companies raising funding," she added.
And Dr Ben Caldecott, director of the UK Centre for Greening Finance and Investment, said the plans would "spur demand for green finance and accelerate decarbonisation, not just in the UK but wherever UK firms do business".