Financial Services Bill

Baroness McIntosh of Pickering Excerpts

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

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Hayman, who is such a champion of climate and other environmental issues in your Lordships’ House. As she said, it is astonishing that the Bill, in the year 2021, presented by the Government with the responsibility of chairing COP 26, who talk so often about being “world-leading” on climate, could have got so far without any mention of the climate emergency.

The noble Baroness and, in introducing the amendment, the noble Lord, Lord Oates, have set out extensively the detail of the range of climate amendments and the need for their incorporation in the Bill, so I shall focus the bulk of my words on Amendment 17 in my name. It is distinct in that, while all the others address the climate emergency, this is the only amendment that also brings in the crucial issue of our nature crisis, and the collapse in biodiversity and bio-abundance that is obviously of concern to the Treasury given its commissioning of the recently-released Dasgupta Review.

I doubt that many noble Lords taking part in the debate on this group need an outline of it, but it is important to highlight that the Dasgupta Review identifies nature as “our most precious asset”. It says that we need vastly more protection for our scant remaining natural world—on this, one of the planet’s most nature-depleted lands—which means making sure that money is not going into destructive actions. That should be of concern to the Financial Conduct Authority. It says too that we should begin to implement large-scale and widespread investments that address biodiversity loss—again, a matter for the Financial Conduct Authority.

While it is great to see in the Dasgupta Review these critical issues to all of our futures expressed in terms that even mainstream economics can understand, being comfortable for those whose philosophy is embedded in growth-orientated, 19th-century politics, it falls down in trying to apply the same unrealistic, abstract mathematical models, driven by financial calculations, to provide tools to guide what to do. We have so little left of biodiversity and bio-abundance, with 50% of our species in decline and 15% at imminent risk of extinction, that we cannot be calculating what we can afford to destroy or write off in this land. We have to preserve everything that is left, while acknowledging that the destruction that we have wrought has given us an insecure, poverty-stricken society that is frighteningly short on resilience, as the Covid-19 pandemic has demonstrated and, as we have just seen on the global scale in Texas, precious little ability to endure the climate shocks inevitably coming our way.

I point noble Lords and the Government to the recent, crucial United Nations Environment Programme report, Making Peace with Nature. In his foreword to it, the UN Secretary-General, António Guterres, says that

“our war on nature has left the planet broken”.

That is where we are. The often piecemeal response to the climate crisis, biodiversity loss and pollution is

“not going to get us to where we want”,

according to Inger Andersen, executive director of the United Nations Environment Programme.

Just considering the remit of our international climate obligations as a central part of the FCA’s responsibilities is not nearly enough, as crucial as that is. Adding our equally binding and important obligations through the Convention on Biological Diversity is a significant improvement, and I give notice to your Lordships’ House that this is an issue that I intend to pursue strongly at the next stage of the Bill. I will listen carefully to today’s debate, and any responses we get from the Government, and consider where best to place this amendment among the range of amendments, although I hope that the Government will pre-empt any need for me to do that.

Yet this is still not nearly enough, as the UNEP is highlighting. We also need to consider pollution as a key concern, and a circular economy, on which the European Union is leading. We need a systems thinking approach—a complete view of how we stop treating this planet as a mine and a dumping ground and treasure its immensely complex systems of life, of which we still have so little understanding. Of course, we also have to consider the billions of people—millions in the UK alone—whose basic needs are not being met while we trash our planet. As a species we are using the resources of 1.6 planets every year; in the UK, our share is three planets.

This morning I was present at a briefing about New Zealand’s modern, 21st-century living standards framework, on which there has been wide public and expert consultation. It provides a guide for Treasury decision-making on all government spending. That is truly world-leading, and I hope that the UK Treasury is looking urgently at developing a similar system. In the meantime, however, the inclusion in this Bill of our climate emergency and nature crisis—the understanding that our financial sector is 100% contained within it—is at least progress.

The other place has before it the Climate and Ecological Emergency Bill, which could help to create a framework for such a structure. Given that it is “oven-ready”—to quote a once-familiar phrase—and the continuing delays to the Environment Bill, the Government should be looking at a rapid delivery of whatever emergency steps could be taken—as many as have been taken over Covid.

I revert to the Bill before us. I was told that the 2020 Pension Schemes Bill was the first financial legislation in British history to contain a reference to climate change—no doubt the first to refer to the natural world. Listening closely to the briefing that I referred to earlier, I sense that the Government are at least prepared not to step backwards in this 2021 Bill, and to include some reference to climate change. But if it is to progress it also needs to include biodiversity.

In concluding this section of my comments, I ask the Committee to listen to a short quote:

“Obviously it is right to focus on climate change, obviously it is right to cut CO₂ emissions, but we will not achieve a real balance with our planet unless we protect nature as well”.


That was a quote from Prime Minister Boris Johnson’s speech of 11 January as he announced that £3 billion of UK climate finance was to be spent on supporting nature. I ask the Minister how, given the Prime Minister’s words, he could not have included an amendment such as Amendment 17, in addition to one or more climate change amendments.

Allowing money to pump the systems that are wrecking the natural world is, to put it mildly, not a good idea. It is something that should be considered in every action and every regulation of every government body, particularly the Financial Conduct Authority, given the extreme financialisation of our economy, whereby almost every element is now regarded as a potential profit source. Those profits, which go to the few, must not be at the expense of the living future of all of us.

I turn briefly to the other amendments to which I have attached my name, the first of which is Amendment 23, in the name of the noble Lord, Lord Oates, also signed by the noble Baronesses, Lady Kramer and Lady Hayman. This amendment simply ensures that regulation is compliant with the amended Climate Change Act and the Government’s much-trumpeted 2050 net-zero target. That is a bare, indeed inadequate, minimum, because it fails to acknowledge the need for urgent action now to achieve major cuts in emissions in the 2020s. Not waiting but acting now should be at the forefront of every government action.

I backed Amendment 75, in the name of the noble Baroness, Lady Hayman, and supported by the noble Baroness, Lady Altmann, because of the need for expertise in these issues within the FCA. Its many failings in traditional areas were powerfully outlined earlier by the noble Lord, Lord Sikka. It certainly needs a specialist, expert voice at its heart to address environmental issues.

I also attached my name to Amendment 98, in the name of the noble Baroness, Lady Hayman, and also signed by the noble Baroness, Lady Jones of Whitchurch, which focuses particularly on climate risk. I would suggest that this falls, in the terms of the Paris climate agreement, in the areas of both climate mitigation and adaptation. The need for mitigation is a risk in itself. We heard the astonishing news this week that local government pension funds still hold £10 billion in fossil fuel investments, despite large numbers of local councils having declared climate emergencies. That is astonishing in terms of money being invested in trashing the climate in ways already hitting close to home—flooding, heatwaves and biodiversity damage—but it is also as though the term “carbon bubble” had never been invented. Perhaps we cannot blame local government for the oversight when our current Government have continued to put money into fossil fuel assets and to subsidise the operation of existing ones to the tune of billions. These are issues that certainly need to be considered.

However, there is also adaptation. I do not feel like I need to stress so much—as the Green Party has for years—that the climate emergency is a current reality, not a problem for future generations. I think, finally, the Government and even parts of industry and finance have got that fact. I note that, today, Fitch Ratings warned that the rising cost of natural catastrophes arising from climate change could mean that insurers withdraw from the market, leaving it to Governments to pick up the pieces. Amendment 98 would be a modest step towards ensuring that the FCA has rules fit for operating in such an environment.

[Baroness McIntosh of Pickering (Con) [V]]

My Lords, I am delighted to follow the noble Baroness, Lady Bennett of Manor Castle, and pay tribute to her green credentials and the work that she and her colleague, the noble Baroness, Lady Jones of Moulsecoomb—both my friends—have done, as have so many others who have contributed to this debate so far today. I look forward to the other contributions.

This group of amendments has much to commend itself, as do many of the individual amendments. It helps to green-proof, if I may say that, the provisions of the Bill. I am sure that my noble friend Lord Howe will tell me if I am wrong when he comes to reply, but I cannot find anything else in the Bill that covers the provisions set out in these amendments. I pay tribute to the noble Lord, Lord Oates—I celebrate, again, the fact that we joined the House together; I always look forward to debates in which he and I contribute—and to the noble Baronesses, Lady Hayman and Lady Bennett. My slight concern with this group is that while the focus and main thrust of their amendments is on climate change I am slightly confused that they have chosen that form of words—as they also have in other amendments—because so much progress has been made in investment generally. I personally believe that that should extend to banking and financial services as well as other investments, but there is general recognition now of ESG investments. The Wikipedia encyclopaedia tells us that:

“Environmental, Social, and Corporate Governance”


are generally recognised as measuring

“the sustainability and societal impact of an investment in a company or business.”

It goes on to say that:

“Threat of climate change and the depletion of resources has grown, so investors may choose to factor sustainability issues into their investment choices.”


We are increasingly seeing a move in general investments towards individual small shareholders buying very small, limited shareholdings in a company precisely for the purpose of raising these issues at the AGM. I think we will see this trend continue. This must extend, as I said earlier, to banking and financial services as well. I believe that there should be a place for ESG provisions and regulation by the FSA in the Bill, and these amendments identify where they should go.

However, I am mindful of the fact that ESG covers all sorts of possibilities, such as climate change, greenhouse gas emissions, biodiversity, waste management and water management, so I put to the authors and to my noble friend the Minister that ESG provisions would encapsulate this and would perhaps be a neater—and recognised—way of introducing this into the Bill.

In many instances, particularly in all the work that we have done on rural affairs, we rural-proof legislation as it goes through and I am very keen that we green-proof new legislation as it comes online. I therefore welcome the main thrust of these amendments. I repeat to my noble friend the Minister that if this is an omission, these amendments, or something along the lines of ESG terminology, should find a place in the Bill and a role for the regulators specified in it to follow. If these amendments do not fit the Government’s thinking or should we follow more of an ESG terminology, will he consider coming forward with amendments of his own at the next stage?