9 June 2021 / Macro

Climate disclosures and tax commitments: What to expect from G7 summit

By Natasha Turner

TCFD is on the agenda for G7 Summit which takes place in Cornwall 11-13 June

Climate disclosures and tax commitments: What to expect from G7 summit

The G7 summit will get underway this week but new commitments are already hitting the headlines, including mandating Taskforce on Climate-related Financial Disclosures (TCFD) disclosures and creating a global minimum corporate tax rate.

At a virtual meeting earlier this month, finance leaders committed to mandating climate reporting in line with the recommendations of the global TCFD and embedding biodiversity loss considerations into financial decisions.

Andy Pitts-Tucker, managing director, ESG ratings and advisory at global financial services provider Apex Group, welcomed the mandating of climate risk disclosures.

“The direction of travel is clear and market leaders are already beginning to make headway, mitigating and managing their exposure to both climate and regulatory risks along the way. The elephant in the room is that the vast majority of private companies and their investors have not even begun to think about these issues, let alone reporting on them.

“The time for awareness-raising and education should be coming to an end,” he added. “Now regulators and asset owners are demanding more, private companies and their investors need to focus on identifying, quantifying, reporting and managing their climate-related risk.”

See also: – G7 Summit on track for carbon neutrality

But some green finance announcements have also been met with criticism. G7 countries have committed to funding the Covid-19 recovery, but as this outlook from risk intelligence company Verisk Maplecroft shows, in the world’s 20 largest countries nearly half of this has funded fossil fuels.

Similarly, development charity Tearfund found countries attending the upcoming summit committed $189bn to support oil, coal and gas between January 2020 and March 2021. The same countries spent $147bn on clean forms of energy.

An Extinction Rebellion protest (pictured) held in Oxford, UK, outside the Clarendon Building where health ministers were said to be meeting ahead of the summit, also criticised the lack of climate considerations in the response to Covid-19, saying “there is no vaccination against the climate crisis”.

See also: – A fight for life: Extinction Rebellion’s message for business leaders

Tax deal

Last weekend, ministers struck a new tax deal to create a global minimum corporate tax rate of at least 15% and make the world’s largest multinational companies pay more tax in each country they operate in.

According to the Organisation for Economic Co-operation and Development (OECD) some £57bn in additional tax revenues each year could be raised as a result.

The world’s biggest companies, including Amazon, Google and Facebook, and potentially companies such as Shell and BP, will need to pay more tax in countries they operate.

The deal has been branded “historic” and welcomed in statements from Amazon and Google. But some campaigners said it does not go far enough.

“It’s absurd for the G7 to claim it is ‘overhauling’ a broken global tax system by setting up a global minimum corporate tax rate that is similar to the soft rates charged by tax havens such as Ireland, Switzerland and Singapore,” said Gabriela Bucher, executive director of Oxfam. “They are setting the bar so low that companies can just step over it.”

Ensuring portfolio companies pay their fair share of tax is part of responsible investing. “It must be asked, will the tolerance of generations’ that graduated into the 2008 and Covid-19 recessions wear thin, when they learn that their newly carbon-neutral pension manager invests in companies that undertake tax acrobatics to avoid paying their fair share of tax, which is needed now more than ever?” Epworth Investment Management CEO David Palmer wrote in ESG Clarity back in December.