The other G7 pact: companies must make mandatory reports on their climate impact

The G7 summit, held in London this weekend, ended with a major player: the “historic” agreement to impose a global tax on multinationals. But it was not the only pact that was achieved. Finance ministers also sealed a commitment to move towards the energy transition of the financial system.

The intention is to require large companies to publish reports on their climate impact. Data such as, for example, their _C02 emissions or their investment in emerging technologies that respect the environment, reports AFP. According to Reuters, it is increasingly common to collect this type of information on a voluntary basis. In some cases, as in France, it is already mandatory.

The G7 aims to ensure that financial decisions take climate issues into account. This would help mobilize “trillions of dollars” from the private sector and strengthen government policies to achieve the goal of net zero emissions by 2050. The problem right now is that central banks and other financial regulators are complaining about the lack of reliable data on companies’ climate impact. The seven therefore want investors to have access to “high quality, comparable and reliable” information.

The idea of mandatory climate impact reporting is not new. The G7 follows the recommendations of the TFCD, a group made up of G20 members and chaired by Michael Bloomberg. This body points out that at present the financial sector does not have a clear vision of how companies will face the technological or regulatory changes associated with the climate. Without reliable information, markets will not be able to “properly assess climate-related risks and opportunities” and will face a “difficult” energy transition, they explain on their website.

At the moment, what was sealed at the G7 summit is only a compromise. According to Reuters, some voices believe that an international agreement could be reached before the United Nations Climate Change Conference in Glasgow, to be held in November.

Aid to poor countries

During the G-7 meeting, economic aid to the poorest countries hit by the pandemic was also discussed. The group supports the expansion of the general allocation of special drawing rights (SDRs). These are international reserves that the International Monetary Fund (IMF) created in 1969 to supplement the official reserves of member countries. These funds were used, for example, during the 2008 financial crisis. The IMF seeks to expand the overall allocation of SDRs to $650 billion. And the G7 calls on the IMF to speed up the process to channel these funds and be able to allocate them to health needs, Covid vaccines and the economic recovery of the most affected countries.

The “historic” tax

Although, without a doubt, all these plans were overshadowed by the pact to set a 15% tax on multinationals. It was the star decision of a summit that lasted for two days. The agreement lays the first foundation for a new international taxation. The G7 finance ministers – the United States, Canada, Japan, France, the United Kingdom, Italy and Germany – agreed on a reform so that countries can tax a part of the profits generated in their jurisdiction by a multinational based abroad. And, on the other hand, so that countries can impose a global minimum tax on the profits that a company based in their jurisdiction achieves abroad. For now, the measure is not a reality. The reform will need to win the support of the G20, which meets in July in Venice.

Source: Forbes