UK government moves on carbon reporting and executive pay

New initiatives on emissions and corporate governance

The UK government has made two announcements that seek to raise the bar on corporate emissions reporting and curbing executive pay.
Firstly, it announced that it would force listed companies to report emissions from 2013 so that investors can see how firms manage emissions costs.
The move would enable investors to see which firms are effectively managing “the hidden long-term costs” of emissions.
The plan, which will make the UK the first country to make it compulsory for companies to include such data in their annual reports, was set out by Deputy Prime Minister Nick Clegg at the Rio+ 20 Summit today.
The new regulations will be introduced from April 2013. They will be reviewed in 2015, before ministers decide whether to extend the approach to all large companies from 2016.
Environment Secretary Caroline Spelman said: “Investors are now looking hard at the green credentials of businesses, and the reporting of greenhouse gas emissions will give them vital information as they decide where to invest their money.”
The investor-backed Carbon Disclosure Project said it strongly supported the decision. Thee CDP, which is backed by 655 institutional investors representing $78trn, said: “The UK must now take a position of global leadership by introducing regulation that ensures companies are required to make a full assessment of how climate change is expected to affect their business.”It encouraged the government to adopt the climate change reporting framework developed by the Climate Disclosure Standards Board (CDSB), a special project of CDP.
Environmental pressure group WWF-UK said the carbon reporting plan was a positive step and an important symbolic move. But it said emissions needed to be tackled “with a much greater sense of urgency”.
In addition, in a widely trailed announcement, the government introduced a series of measures to address what it termed “failures in corporate governance” by giving shareholders binding votes on companies’ pay policy and exit payments.
It would also boost transparency and said it would “ensure that reform has a lasting impact by empowering business and investors to maintain recent activism”. The reforms will be enacted by October 2013.
The binding votes plan was welcomed by the National Association of Pension Funds (NAPF), the trade group. Its Head of Corporate Governance David Paterson said binding votes could help “put the brakes on” executive pay that is ratcheting up “in a cloud of complexity”.
“The reforms should help bring about a much-needed cultural change. They present a challenge to companies and investors as there will be a need for better communication by both.”
The Association of British Insurers said the proposals were “practical, workable and should help tackle excessive executive pay”. Carbon reporting announcement