The five climate conditions we say companies must commit to for UK assistance

ClientEarth has called on the Government to ensure companies receiving public support during the COVID-19 recovery adhere to five strict conditions to ensure economic growth does not come at the cost of the UK failing to meet its climate commitments.

Earlier this month, ClientEarth lawyers sent a letter to Prime Minister Boris Johnson, Chancellor Rishi Sunak and a number of other ministers, stressing that companies receiving assistance as part of the recovery package must make climate-related disclosures, commit to net zero emissions and align their businesses with the Paris Agreement.

Amid ongoing economic uncertainty, the Government has started to unveil further recovery measures to boost economic growth, including bailouts and long-term support for struggling firms.

The recovery package will strongly influence whether the UK will meet its legal commitments under the Paris Agreement and Climate Change Act, while protecting people’s livelihoods in the move to a net zero emissions economy.

The need for climate leadership

ClientEarth CEO James Thornton said: “How we recover from the economic shock caused from the tragedy of COVID-19 will be pivotal in the fight against climate change.

“It appears the peak of the virus has passed for now, but we simply cannot put on hold our response to climate change while we deal with the pandemic. On the contrary, the recovery allows the Government to kick-start the UK’s economy in a way which ensures long-term resilience and a more fair and just transition to a net zero economy.

“Taking action consistent with the Paris Agreement and the UK’s binding net zero by 2050 target signals that the UK is serious about its climate commitments, by showing leadership at home and abroad in advance of hosting the next climate talks.”

Key conditions for a resilient recovery

ClientEarth has called on the Government to ensure all UK-listed companies, or those with an annual turnover greater than £45 million that will receive support in the recovery package, make a legally enforceable commitment to:

1. Report in line with the recommendations of the Financial Stability Board’s Task Force on Climate Related Disclosures (TCFD) in their annual reports;
2. Achieve net zero emissions (scope 1, 2 and 3 emissions) by 2050 or earlier depending on the sector, with staged interim reduction targets, without relying unreasonably on unproven or uncosted negative emissions technology or offsets;
3. Disclose a credible business plan, which includes clear measures for transparency and accountability, that is aligned with the goals and timelines of the Paris Agreement within a maximum of 12 months after receiving support, and report annually on progress against targets; and,
4. Link management and director remuneration and incentives to achieving the targets within the Paris-aligned business plan.
5. To ensure long-term company health and workers’ interests are prioritised in the context of a just transition, impose restrictions on executive pay, including bonuses, and capital distributions – including share buy-backs and dividends – while receiving support from government

These conditions are steps that all businesses – not just those receiving public support – must start to take and will become the norm.

Responsibility and accountability

Lawyers said building these conditions into recovery packages will help to ensure the UK remains resilient in the face of the impending climate crisis. In working to identify climate risks and plan for the transition, businesses will be able to seize the opportunities presented by the net zero transition.

The Government should undertake to monitor compliance with these conditions and, given the taxpayer is ultimately footing the bill, the Government should have and use the power to impose sanctions for non-compliance.

Thornton added: “Since the Government is the steward of UK taxpayer’s money, it must act as a responsible investor when providing public support through its recovery package. This means actively engaging with the companies it supports, imposing climate-related conditions, and promoting transparency and accountability. These five conditions are concrete steps that should be taken to achieve this.”