Financial Services and Markets Bill [HL]

Baroness Penn Excerpts

Committee stage
Monday 29th June 2026 Grand Committee

[Baroness Coffey (Con)]

My Lords, I will speak to Amendment 142, which I have signed, and Amendment 172, which I strongly support.

The whole concept of the TNFD follows on from the TCFD, but it has been driven and particularly supported by Defra over the past several years. As such, David Craig, who has been tremendous in promoting the TNFD, has started, just after another session of London Climate Action Week, to share the frustration of many that we already have the ISSB, which has made progress: at its April meeting, I think it agreed a way forward for its IFRS practice statement to start to be included automatically in accounting standards around the world. Indeed, we know that investors are now asking boards what they are doing about understanding their risk if certain things in nature start to change. That is, in effect, what the TNFD is about: it is not saying that you cannot do this, that or the other but about making sure that you think ahead. Why does it matter? Well, nature is at the very heart of the food we eat and pretty much every pharmaceutical we use. That is why it matters to start having this as a regular, ongoing way for the board of every business in this country to think about it.

I appreciate that there have been various difficulties over recent years when it comes to the subject of Amendment 172. I nearly got the regulations through, but then it was held up because of the issue involving Northern Ireland having to follow EU law and the then Administration finally deciding that they did not want, at the time, to try to work out a way for the two to be managed within the United Kingdom. That issue has been ongoing, and I appreciate that the Minister, Mary Creagh, announced a policy paper last week. I think it is fair to share with the Committee that the European Parliament itself voted to delay the implementation of the EUDR—which is about the forest risk commodities—and to start to restrict some of the elements that were being applied. Mary Creagh suggested that we would perhaps go further than our original suggestions on which commodities we would focus on to get these regulations into place.

Why does it matter? In values, the UK is second only to China in the importation of the products—the commodities—that risk deforestation. We took a pragmatic approach in the UK, in that we were not looking to do what the EU was trying to do, which was trying to make every product “deforestation free”. We took an approach of basically saying that you have to show that your products are not a result of illegal deforestation—at the time I thought that that was a pragmatic move, and I still do.

Again, it shows that we need to recognise the implications of what some of my noble friends may think unnecessary: we actually have responsibilities in a variety of conventions to which we have signed up, over the years, to recognise our role in supporting free trade around the world, while making sure that free trade is done in a responsible way. This is about trying to make sure that supply chains understand where their products have come from and to address that, if necessary, to make sure that their products are not, in effect, being sourced illegally.

On the basis of the two amendments tabled, I hope the Government will consider this further. Mary Creagh made an announcement last week about the Great British version of the EUDR, but apparently no regulation is due in your Lordships’ House until 2027. It is disappointing to hear about the slow work, especially as regulations were pretty much drafted three years ago. With that, I will support this amendment in Committee and if it is put to the test in the House on Report, I will support it then too.

[Baroness Penn (Con)]

My Lords, I will speak very briefly to Amendment 140 on transition plans and Amendment 172 on forest risk commodities, to which I have added my name. On transition plans, I do not think it is really an interest to declare, but a reason I signed that amendment is that I was a Treasury Minister—in some ways a similar position to that of the Minister now fielding friendly questions from noble Lords—on the previous Financial Services and Markets Bill, in particular on parliamentary accountability. At the same time, I was also acting as co-chair of the Transition Plan Taskforce that worked collaboratively with businesses as well as NGOs and academics to produce the transition plan disclosure framework now hosted by the ISSB. I would like to emphasise the collaborative nature of that work and those involved in it.

This was not government writing a framework for business. The task force was co-chaired by Amanda Blanc of Aviva. Its membership included the London Stock Exchange Group, NatWest, Diageo and many other businesses—and, I think, the Church of England Pensions Board—all working together to develop the content of a framework that worked for business.

I also reiterate my commitment to the importance of climate risk and nature risk to our financial institutions and our financial regulation, and the importance of finding a way to incorporate that into our approach. I believe that disclosure has been important in driving change and will continue to be so. However, it is one of many different approaches. One success that came with TCFD was that it was part of a global move led by the UK that got all G7 countries to sign up to the same disclosure standards, creating somewhat of a level playing field. There is a question as to whether that momentum continues today and whether further action on disclosure is the right thing at this time, versus many of the other different levers that we can pull beyond the UK’s SRS S1 and S2, which were published earlier this year, and on which the FCA is currently consulting.

It is a legitimate and open question to think about how much further at this stage we want to go on disclosure. The Government, though, have a commitment in their manifesto to go further, saying that there should be mandatory transition plans aligned to 1.5 for all UK businesses. They consulted a year ago on that position, and we have had nothing since. I really want to join others in getting some clarity from the Government on what they think the right approach is. Is it further action on disclosure? Is it further action in other areas? To me, the fundamentals remain the same: climate change and nature risk are material to our financial system and its stability. We need more investment in our transition to a low-carbon economy. The UK is a leader in green finance and can be one in transition finance, too. How do we want to maintain and build on that?

I should like to hear how the Government want to achieve those aims. It may be through the different policies contained in the amendments here—it may not be. We have to have a more open discussion about the trade-offs involved in some of these areas: how you get businesses and Governments to recognise these risks, who pays for them, and how you spread those costs. I am not saying there is a single answer or, much as I would like to, that the answer I was working on three years ago continues to be the right answer. But clarity and articulation of the Government’s position, rather than nearly a year of silence, would be helpful in moving us forward in what continues to be a really important area for our country and for financial services regulation.