Firms on London Stock Exchange Will be Forced to Report CO2 Data

UK deputy prime minister Nick Clegg revealed today at the UN Rio+20 Earth Summit a government mandate that will force companies listed on the London Stock Exchange’s main market to publish the full details of their greenhouse gas emissions. His announcement comes on the heels of NASDAQ’s plan to encourage businesses to list more of their environmental, social and governance risks.

All LSE-listed businesses will have to report total greenhouse gases for the year beginning April 2013. The regulations will be reviewed in 2015, before ministers decide whether to extend the approach to all large companies from 2016, the UK’s Department for Environment, Food and Rural Affairs said.

The UK government sees reporting as the first vital step for companies to make reductions in emissions. It’s estimated the policy will save four million tons of CO2 emissions by 2021. The UK has made a commitment to cut its carbon emissions to 50 percent of 1990 levels by 2025.

Counting business costs while hiding greenhouse gas emissions is a false economy, Clegg said.

Several environmental and employer organizations have hailed the announcement. These include the Confederation of British Industry and Aldersgate Group. The UK-based Carbon Disclosure Project strongly supports the mandate and said the government should now introduce regulations to ensure companies are required to make a full assessment of how climate change is expected to affect their business.

Shortly before Clegg’s announcement, NASDAQ OMX said it would join forces with four other stock exchanges – Cairo, Istanbul, Johannesburg and Sao Paulo – to encourage companies to list more of their environmental, social and governance risks.

Under the Sustainable Stock Exchanges commitment, five markets including Brazil’s BM&FBovespa and the Egyptian national stock exchange will urge companies in their exchanges to increase the information they release on such risks, or explain why they will not.

By encouraging companies to take social and environment dimensions into consideration, and by helping investors to make socially responsible decisions, the exchanges are hoping to enhance transparency of information in capital markets and help create more aware investors.

The markets together list more than 4,600 companies in developed and emerging countries, and are urging other exchanges to make the same commitment.

BM&FBovespa first proposed such a move in January this year. The Johannesburg Stock Exchange made sustainability or similar reports a requirement for listed, privately held and state-owned companies in 2010. Such reporting is also mandatory for listed companies in France and Denmark, and for state-owned enterprises in Sweden, BM&FBovespa said in January.

The Brazilian exchange, in conjunction with the Global Reporting Initiative, held workshops earlier in the year to help familiarize companies with sustainability reporting.

Also in January, it was reported that two influential documents – the Rio+20 negotiating text and the recommendations of the UN secretary general’s High Level Panel on Global Sustainability – both propose tighter sustainability reporting requirements for businesses.

Writing in the Guardian, Chatham House fellow Paul Hohnen argued that the text in the documents was similar to that which emerged from the 1992 Rio de Janeiro and 2002 Johannesburg summits, encouraging voluntary reporting. One recommendation in the UN paper was to mandate reporting by companies with market caps over $100 million.

In a recent Chatham House paper Hohnen argued that these were just the right questions for governments to be discussing now.