The All-Party Parliamentary Group (APPG) on ESG, the UK’s cross-party group dedicated to sustainable finance, is calling on the government to launch a unified ESG strategy or risk falling behind the EU, “wasting billions of pounds” and letting ‘ESG cowboys’ run amok.
The APPG, which was set up in 2021, said the government should link together existing policies and strategies such as the Green Finance Strategy released in March 2023, the Net Zero Strategy, The Net Zero Review, the Net Zero Growth Plan, the Energy Security Strategy, the Environmental Improvement Plan, Sustainability Disclosure Requirements, the UK green taxonomy, and the Financial Conduct Authority’s sustainable investment labels.
“Without a joined-up approach, UK businesses will waste billions of pounds complying with ESG standards without reaping the full benefits for themselves or society as a whole,” the group said in a statement.
In a report released today citing ESG Clarity articles in its media sources, the APPG set out a definition for ESG and provided an overview of the landscape in the UK and abroad, as well as setting out how a joined-up approach could work. It said the strategy should include an action plan for a considerably wider disclosure regime that applies to more businesses and more ESG factors, and should undertake legislative measures to ensure regulators have the powers they need.
“The UK is falling behind the EU in ESG, which will soon launch extensive reporting requirements on 50,000 businesses across the bloc. The UK needs to catch up with an action plan for ESG disclosures,” the group said.
The strategy should also put together a disclosures advisory group to decide how to support disclosures from small and medium-sized businesses, it said. Among other things, the advisory body will explore technological solutions with regards to Scope 3 reporting and other data-related challenges for SMEs.
The advisory group would also examine ways of developing a larger UK cohort of ESG professionals. “There are not enough skilled ESG professionals in the UK, leading to a market strewn with ‘ESG cowboys’,” the APPG said.
High on the advisory group’s agenda will be developing proposals for a larger cohort of ESG professionals operating across the country.
The APPG also recommends a sector-by-sector assessment of what counts as material to ESG, combined with a major assessment of ESG frameworks, metrics and underlying data to identify pathways to standardising as much as possible. It is calling on the government to launch an ESG data consultation to ensure this, which would look to improve the quality of reporting, help tackle greenwashing and develop policy options towards enforcement.
Alexander Stafford MP (pictured), chair of the APPG on ESG, said: “Time and again in discussions of the APPG, we see the need for greater government intervention to harmonise and strengthen the application of ESG principles, disclosures, and frameworks… In an unregulated market, charlatan consultants can run riot, damaging businesses and undermining markets. This needs to be checked through government-led solutions.”
Stafford added the misunderstanding of ESG in parliament “could spell the end for sustainable finance” but that he hopes the explanations laid out in today’s report will serve to education and encourage better-informed debate in the houses. The APPG found less than 10 MPs not associated with the group and not in government have mentioned ESG in the past year in parliament.
“ESG frameworks are absolutely pivotal to leveraging green and socially responsible investment,” he said.