Investments: Environmental, Social and Governance Criteria

Baroness Bennett of Manor Castle Excerpts

Wednesday 2nd March 2022 Lords Chamber

Asked by

[Baroness Bennett of Manor Castle]

To ask Her Majesty’s Government what assessment they have made of the level of demand for investments that are advertised as meeting Environmental, Social, and Governance (ESG) criteria; and what steps they are taking, if any, to ensure that such investments are in line with (1) the United Nation’s Sustainable Development Goals, and (2) the Paris Agreement on climate change.

[Baroness Penn (Con)]

My Lords, demand for sustainable finance is growing rapidly. Some 49% of UK-managed assets now integrate ESG factors, and there is strong demand from consumers and investors for such assets. The Government are committed to ensuring that this growing market is well regulated and that the UK is the best place in the world for sustainable finance. That is why the Government have taken world-leading action to green our financial system, safeguard consumer interests and prevent greenwashing.

[Baroness Bennett of Manor Castle (GP)]

I thank the noble Baroness for her Answer. I know that she is aware of the recent article in the Financial Times, entitled “ESG: the next mis-selling scandal?” This suggested that there were strongly misleading claims being put on financial products labelled as green, sustainable, ESG, et cetera. Does the Minister agree that no product should be so labelled if it is not compliant with the Paris and, indeed, Glasgow climate agreements, international biodiversity treaties and the sustainable development goals? Given that report and many others, do the Government not need to act urgently to ensure that there is adequate regulation or legislation to make sure that people are actually getting what they believe they are putting their money into?

[Baroness Penn (Con)]

The noble Baroness is absolutely right. That is why the UK is developing an economy-wide regime for ESG disclosure, focusing in the first instance on those requirements related to climate change. Alongside that, the FCA is creating a consumer-facing label, so that consumers seeking to invest in ESG products know what they are investing in and that it meets the high standards that they would expect.