Governments are under pressure to ensure that any financing used to assist the economic recovery from COVID-19 embeds climate change policy.

By Paul A. Davies and Michael D. Green

The economic impact of COVID-19 has required unprecedented state intervention and support for companies and individuals in countries around the world. Now, certain climate policy advisors and advocates are calling for climate change policy to be integrated into such support.

In the financial sector, individuals such as Mark Carney, the former governor of the Bank of England, have been at the forefront of advocating the adoption of climate-related disclosure requirements. Mark Carney identified the recovery from COVID-19 as a “chance to avoid returning to the status quo”.

One area of interest is whether national governments should link any loans or other financial support they provide, to an obligation on the part of the recipient to make climate-related disclosures and/or otherwise address climate-related risks. Two particular countries that are making such links include:

• Canada – The Canadian federal government is providing finance to large companies that have been impacted by COVID-19. Such large companies are considered as those with annual revenues in excess of C$300 million. Those receiving such finance are obliged to make annual climate-related disclosures in accordance with the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (widely known as TCFD).
• The UK – The Committee on Climate Change (CCC), an independent body established to provide advice to the UK government, believes climate policy can form a core part of rebuilding the economy as part of responding to COVID-19. On 6 May 2020, the CCC wrote to the Prime Minister with six key recommendations: (i) support the economic recovery and jobs by bringing forward investments and infrastructure projects that are aligned with reducing emissions; (ii) encourage new social norms around travelling and working patterns; (iii) tackle the wider “resilience deficit” on climate change through the establishment of policies and strategies to address climate-related risks; (iv) embed fairness as a core principle, as part of ensuring that the benefits of acting on climate change are shared widely; (v) ensure that the recovery does not “lock in” greenhouse gas emissions or increased climate risk; and (vi) strengthen incentives to reduce emissions as part of considering fiscal changes (g., changes in tax policy that can aid the transition to net-zero emissions). To date there has been no official government response to the letter.

The world remains at an early stage in assessing the longer-term impacts of COVID-19. Governments face multiple pressures in their efforts to encourage an economic recovery, and Latham & Watkins will continue to monitor the extent to which low- and no-carbon policies feature in these efforts.