Financial Services Bill

Baroness Altmann Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 24th February 2021 Grand Committee

On that point, I agree with my noble friend Lord Howe, that, as he noted earlier, in practice, good regulations are exported. We have an opportunity to craft some good regulations here and I do not believe that these amendments achieve that aim.

[Baroness Altmann (Con) [V]]

My Lords, I support all the amendments in this group. It is a pleasure to follow my noble friend Lord Sharpe, but we may have slightly different views on some of the issues he has mentioned. I also support the wide-ranging aims of the amendments in this group to ensure that our financial services sector and its regulation faces stronger requirements to take responsibility for, and consider its role in addressing, and hopefully managing and mitigating, climate change risks.

I congratulate the noble Lord, Lord Oates, on his excellent introduction to the amendments in this group and his comprehensive summary of the issues. These amendments, or a version of them, are in my view essential to the success of our financial services sector and its role as a global leader. This is not a party-political matter. It straddles the role of our country and its financial system in saving the planet from the clear and catastrophic risks faced by humanity across the globe. I declare an interest in this issue as a member of the cross-party group, Peers for the Planet, and the Conservative Environment Network.

I share the view of the noble Lord, Lord Oates, and other noble Lords that it is astonishing to see that this Financial Services Bill makes no mention of assessing, encompassing and managing the risks from climate change that have the potential to undermine the financial system. Failing to require any regulatory oversight or demands on such existential risks is surely a failing in this legislation. The noble Lord is correct that difficulties in measuring these risks cannot justify simply ignoring them. The risks are real and rising.

I understand the point just made that we cannot anticipate the weather or other climate matters before the fact, but the financial industry is surely well used to anticipating risks that have not yet arisen. I argue that the regulators can indeed require firms to conduct scenario analysis with reasonable assumptions about the risks of certain rises in temperature or other activities that are threats to the planet, just as financial firms are already required to do for interest rate or demographic and other risks.

I have added my name alongside that of the noble Lord, Lord Oates, to Amendments 14 and 35 in the name of the noble Baroness, Lady Hayman, and I thank her for all the excellent work that she has been doing in this area as well. The amendments seek to ensure that the FCA and the PRA must have regard to both our international and domestic climate change commitments. I also support Amendments 11, 12 and 13 in the name of the noble Lord, Lord Oates, supported by the noble Baroness, Lady Kramer, and I have added my name to Amendment 75, which seeks to have a board member of the FCA with responsibility for climate change by amending FiSMA 2000. As other noble Lords have said, that is already required by the SMCR, with firms having to have board members taking long-term views of risks such as climate change, so it seems eminently sensible to propose that the FCA itself has that too.

I have also added my name to Amendment 48 in the name of the noble Lord, Lord Oates, which seeks to bring forward the 2017 TFCD recommendations to 2023, accelerating the climate-related disclosures rather than waiting until 2025. Again, I accept that the industry needs certainty, and this would be a change. However, I hope that having a bolder ambition can still be justified. This is of course a probing amendment, but I hope my noble friend will consider the issue. Indeed, I believe that the Covid-19 global pandemic, along with leaving the EU, offers an opportunity and potentially an obligation to take climate risks more seriously and recognise that there are issues that can be more important than short-term profit and quarterly reporting.

Businesses have been asked to forgo their operations and invest massive amounts in changing their practices at short notice, and have been forced to accept that they cannot continue as they have done in the past. This shows that previously unimaginable changes can be thrust on the global economy and on industries, sectors and individual firms to which they simply must adjust. I hope we can build on that to realise that forcing financial firms to live up to expectations on climate change, planetary temperature rise and associated biodiversity risks, as the noble Baroness, Lady Bennett, mentioned, is possible, even if painful. The asset management, pensions and banking industries can be encouraged to take more responsibility for driving climate-friendly operations, and regulatory oversight surely can—indeed, in my view, must—direct firms to improve their operations in these areas. So do the Government indeed intend to introduce the issue of climate change into the legislation to ensure that financial services are asked to operate more in the interests of long-term economic and climate sustainability?

Climate risk is inevitably investment risk, both to markets globally and to human beings, who are, after all, the customers of firms across the planet. Surely we have a responsibility to override the externalities that have hitherto prevented individual countries taking direct actions. So will my noble friend comment on some of these issues and the Government’s appetite to address what is clearly a view from across the House that these issues are important?