Financial Services and Markets Bill

Baroness Hayman Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Baroness Hayman (CB)]

My Lords, I declare my interest as co-chair of Peers for the Planet. It is a pleasure to follow the noble Lord, Lord Forsyth; I absolutely agree with his comments and those of other noble Lords as to the importance of taking action during the passage of this Bill in terms of the parliamentary accountability gap that currently exists.

At COP 26 in Glasgow, the then Chancellor—now the Prime Minister—pledged to make the UK

“the world’s first net-zero aligned financial centre.”

That pledge reflected both the necessity and opportunity for this country to embrace green growth. The potential benefits of the UK being a global centre for financial flows, which will power the economy of the future, are huge. Embracing innovation and private investment to scale up new technologies can bring sustainable jobs and growth, far from being a barrier to growth, as the noble Lord, Lord Frost, suggested.

According to analysis by McKinsey, the supply of goods and services to enable the global net-zero transition could be worth £l trillion to UK businesses by 2030. However, the UK financial services industry will not be able to fulfil the Prime Minister’s pledge unless it has both the right regulatory framework to support it so to do and the policy certainty and long-term trajectory that give business the confidence to invest. As the helpful briefing for this debate from Aviva makes clear,

“a booming UK green finance sector requires a transparent and trusted market that combats greenwashing, has clear standardised metrics, and levels the playing field to reward rather than penalise early action.”

I fear that, as currently drafted, this Bill is a missed opportunity. For example, consideration of nature appears to be entirely absent from the Bill, and with it the chance for our financial sector to scale up the nascent and fast-growing nature-based solutions market. While we delay, other countries are making leaps ahead in green finance. Both France and Germany have given their regulators statutory objectives linked to climate change and sustainability.

I know that the Minister spoke in her opening speech about the inclusion of a climate change regulatory principle but, as others have said, this is just one of seven regulatory principles that sit beneath the regulator’s main strategic and operational objectives and is much weaker than if the Bill had contained a clear climate objective. I am sure that the issues as to the hierarchy of priorities and the trade-offs between the objectives, the secondary objective and the principles contained in this Bill—the noble Lord, Lord Bridges, mentioned these—are matters to which the Committee will give great attention during the Bill’s passage.

I fear that the Bill also misses the opportunity to progress previously announced policy steps to align our financial services sector with net zero, notably the commitment to require all UK-regulated financial institutions and publicly listed companies to publish net-zero transition plans by 2023. This Bill is the obvious place to legislate for that policy yet it is silent. Progress has also stalled on taking forward the UK sustainability disclosure requirements and the UK taxonomy. An updated green finance strategy has been promised but not yet published. All this delay risks sending a signal to our financial sector and internationally that the Government are unsure about whether they are truly committed to being a leader in green finance.

Yet businesses are calling for clear, consistent policy and long-term financing frameworks. The CBI has said that

“the big policy lever that’s missing is around green growth”

and that businesses are “confused and disappointed” that the Government appear to be going backwards on their green growth agenda. We need strong leadership, a sense of direction and clarity from the Government. With so much to be gained from creating the right regulatory framework to allow our financial sector to capitalise on the green transition and the many investment and growth opportunities, I am really worried that we will not move at pace to become the world’s first net- zero financial centre. If we do not move at pace and decisively, others will beat us to it; all the competitiveness objectives in the world will not change that.