Incoming climate disclosure regulations across the world will make it a legal obligation for companies to report on their environmental impact and improvements – supporting the transition to a low carbon economy.
This will affect all businesses across all industries.
For those in the finance and payments sector – an already highly-regulated sector – there are particular implications to think about.
That’s what we’ll explore in this article.
Plus, we’ve also included a list of actions to help you prepare for mandatory climate disclosure regulations – because it’s always a good idea to be ahead of the game when it comes to legislation.
This year, countries across the world are rapidly advancing on climate disclosure regulations for businesses.
This was inevitable for a few reasons:
So, what existing climate disclosure regulations are already out there?
Firstly, there’s been a push to standardise what’s included in climate disclosure — for clearer and more consistent reporting across different countries and companies:
These globally-recognised standards (particularly TCFD) have led more and more countries to start rolling out mandatory corporate climate disclosure regulations – forcing companies to report on their environmental impact and how they’re improving it.
The following regulations are already in place:
The US Security and Exchange Commission (SEC) also proposed rule changes in March 2022 which, if implemented (and this seems likely to happen), would also require all public companies registered in the US to disclose on climate-related activities.
For a full overview of current and upcoming corporate climate disclosure regulations across the world, head to our legislation overview blog – we keep it up to date with all the latest on sustainability-related legislation for businesses.
As countries roll out mandatory corporate climate reporting, there’s been a particular push on the finance and payments sector.
You may notice that some of the regulations listed above specifically include banks and financial institutions in the first batch of companies being made to report on climate.
Further, we’ve also seen many initiatives aiming to engage the sector with sustainability – such as the Net-Zero Banking Alliance which now has signatories from 23 countries, and the Green Finance Institute which aims to create financial solutions for a low carbon economy through collaboration within the sector.
Why is that?
Well, the financial and payments sector naturally have large influence over how money is spent and invested in the entire global economy, which means there’s a hugely important role for the sector to play as we transition away from an economy built on fossil fuels and towards the green and just economy of the future. That’s why we’re seeing rising scrutiny in the space, so far this has particularly focused on how banks are investing their money – such as the recent revelations around HSBC’s ‘sustainable finance’ which is actually funding mines, pipelines, and oil rigs – but we can expect scrutiny to increase across the sector as a whole as regulations are rolled out.
The emphasis on the sector in discussions around climate regulation reflects this, with governments recognising the need to align the financial sector with climate targets.
In addition to this, payments companies typically:
All of this means that those operating in the finance and payments industry will be expected to disclose on climate impact, risks, opportunities, and actions – if they aren’t already doing so.
It’s easy to see this as a problem – there’s no denying that there is legal risk to address – but it’s also a major opportunity.
We’ve already highlighted that investors are seeing increased return from sustainable investments. At the same time, consumer demand for sustainable products and services is now sky-high, including demand for green payments options. There's an opportunity to fulfil this demand in every industry – but given we’ve already seen that finance and payments have an outsized influence, there’s a particular opportunity for sustainable finance and payments solutions.
Already we’re seeing major players in the industry differentiate through sustainability, such as Stripe developing Stripe Climate and Mastercard launching their carbon calculator.
The next climate leader in the payments space could be your company.
The best time to act on climate disclosure is right now.
Even if your company isn’t yet included in those required to fulfil mandatory climate disclosure requirements in the countries you operate in, it’s a good idea to get ahead of the game. Requirements are highly likely to continue being rolled out to encompass all sizes of businesses – plus if you want to take advantage of the commercial opportunity we’ve outlined above, you need to act quickly to stay ahead of your competition.
There are plenty of actions to get started with to put you in good stead for the changes:
Starting with developing an impactful sustainability strategy which lays out how you will approach sustainability at your company and how it aligns with your overall goals and vision 00is the way to go – including all of the above actions. This will help to ensure you have a clear plan which everyone at the company is on board with and understands how their role contributes – which is a great place to start from to make a real impact on climate as a business.
Lune will offer trusted, high-quality carbon projects to Visa’s global network of merchants, banks, and partners – working together with a goal to scale climate action.
We’ve emitted billions of tonnes of carbon emissions and now (alongside drastically reducing those emissions) we need to get it out of the atmosphere. How do we do that? Well, Direct Air Capture is one solution – here’s everything you need to know about it.
Legislation requiring companies to report on sustainability – their environmental impact and the risks and opportunities facing the business – is upcoming across the globe, from the EU Corporate Sustainability Reporting Directive to the US proposed SEC climate disclosure rule.