Press release: 3 June 2020

Companies must commit to climate conditions to receive UK assistance: ClientEarth

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 country failing to meet its climate commitments.

In a letter sent to Prime Minister Boris Johnson, Chancellor Rishi Sunak and a number of other ministers today, ClientEarth lawyers stressed 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 will start 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.

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.”

ClientEarth is calling 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.

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.


Notes to editors:

The letter to the PM, Chancellor and Secretary of State can be accessed here.

ClientEarth’s position paper on the topic can be accessed here.

*The Financial Stability Board’s Task Force on Climate Related Disclosures (TCFD) released its recommendations in 2017. This sets out consistent climate-related financial risk disclosures, which can be used by companies in providing information to investors, lenders, insurers and other stakeholders.

**Scope 1 emissions are direct greenhouse gas emissions from sources owned or controlled by the company; scope 2 emissions are indirect emissions from purchased electricity consumed by the company; and scope 3 emissions are indirect emissions associated with other activities of the organisation.

***A ‘Paris-aligned business plan’ should include short, medium and long term emission reduction targets (covering scope 1, 2 and 3 emissions) and capital expenditure plans to achieve the net zero commitment.

About ClientEarth

ClientEarth is a charity that uses the power of the law to protect people and the planet. We are international lawyers finding practical solutions for the world’s biggest environmental challenges. We are fighting climate change, protecting oceans and wildlife, making forest governance stronger, greening energy, making business more responsible and pushing for government transparency. We believe the law is a tool for positive change. From our offices in London, Brussels, Warsaw, Berlin and Beijing, we work on laws throughout their lifetime, from the earliest stages to implementation. And when those laws are broken, we go to court to enforce them.