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The King & Decarbonisation 

Yesterday King Charles III read his first Parliamentary speech to both Houses of Parliament in the Lords Chamber.   

From an ESG investment perspective there is a lot to unravel from the speech including:  

• Plans for transitioning to a decarbonised Britain, with the goal of net zero by 2050, including renewed investment in renewable energy sources with licensing of new oil fields to support this transition 

• Trade and investment in fast growing, developing economies is to be promoted 

• New competition rules are to be established for digital markets 

• Climate change and biodiversity loss will be ‘tackled’, alongside supporting developing nations with their energy transition and holding others to their previously set commitments. 

From these mentioned points above, we will dig into the first issue of decarbonisation.  

What impact will this have on an ESG minded investor?  

The transition phase to a carbon free Britian by 2050 will certainly come with challenges that could lead to ‘undue burdens’ on the nation if not handled well.  

Oil and gas companies continue to record eye watering profits, for example BP reached £4bn in profits during the first quarter of 2023.   

With such large profits reported in a time of carbon transition, oil and gas companies must make their transition progress transparent and targeted to justify how such income will contribute to decarbonisation.  

With the government’s Bill introducing licensing for further oil field drilling, it can be hard to see the wood from the trees regarding a carbon free Britain in 27 years’ time.  

It is important to make the distinction that the licensing of new oil and gas extraction in the North Sea does not equate to guaranteed energy security for Britons, as the oil and gas companies are not under obligation to supply Britain with oil and gas. In reaction to the Bill, opposition have claimed that licensing for oil and gas sets a precedence on the over reliance on fossil fuels and further increase our emissions output.  

Such a move by the current government reflects the recent change in policy concerning the push back on the deadline for selling of new fossil fuelled vehicles and gas boilers. But there is a glimmer of hope through the foliage.  

Climate-related disclosures will help investors monitor emitters 

The International Financial Reporting Standards (IFRS) S2 Climate-Related Disclosures reporting standard will be implemented at the start of 2024, providing the template companies need to disclose on climate-related risks and opportunities.  

This will enable investors to understand a company’s strategy for managing climate-related risks, including its climate-related transition plan, allowing investors to see how near or far the big emitters are from the 2050 goal.  

So what does the King’s Speech ultimately mean for the future? 

The tone of the King’s speech wove the narrative of change for the future and how best to tackle these changes to improve the lives of Britons and the environment alike.  

Transparency of company disclosure on the climate transition, will allow those with investment power to help realise this positive change with the help of new reporting standards. 

Written by Integrum ESG Analyst Jack Morphet.