Financial Services and Markets Bill [HL]

Baroness Sheehan Excerpts

Committee stage
Monday 29th June 2026 Grand Committee

My Amendment 140 would give the Government an opportunity on transition plans. It would ensure that we avoid a scenario of protracted uncertainty for the private sector around whether implementation may be so piecemeal or partial that it does not bring about the level of transparency and consistency that investors need. I very much hope that the Minister will be able to say in his response that the Government will use the Bill to implement their given commitments on transition plans.

[Baroness Sheehan (LD)]

My Lords, first, I apologise for being unable to take part at Second Reading due to other commitments. However, my interest in nature and climate-related issues in previous Bills on financial services and markets is a matter of record. Two amendments in this group are in my name. I thank my co-signatories, the noble Baronesses, Lady Boycott, Lady Young of Old Scone and Lady Coffey, for their support because cross-party support sends an unequivocal message to government that this is not ideological but concerns the health of our environment and the future of our natural world.

I will speak first to Amendment 142 on the Taskforce on Nature-related Financial Disclosures. In essence, it seeks to insert a duty into the Financial Services and Markets Act 2000—FSMA—so that regulators must

“make rules requiring such regulated persons as they consider appropriate to disclose information relating to nature-related dependencies, impacts, risks and opportunities”.

Nature-related dependencies are things from nature on which businesses rely, such as water, soil, pollination and healthy ecosystems. Nature-related impacts are harms or pressures that companies themselves put on nature, such as through land use change, pollution or deforestation.

Clearly, nature is financially material, and nature is under threat. Investors are demanding comparable information on how nature loss, biodiversity, water, land use and similar issues could affect companies and profits. This amendment would deliver just that. It would tell the regulators to write the rules and decide which regulated persons should be in scope, shifting TFND reporting from a mainly voluntary framework towards a mandatory requirement. The Dasgupta review clearly showed us that nature is not an externality but an economic foundation. It is, quite frankly, utterly barmy to degrade the very assets on which markets depend.

Deforestation-driven biodiversity loss and ecosystem collapse are high-level threats to UK national security, according to the Government’s own assessment in their report, Global Biodiversity Loss, Ecosystem Collapse and National Security. Four out of the six ecosystems identified as critical to the UK’s security are forests. I utterly endorse the excellent speech made by the noble Baroness, Lady Young of Old Scone, at Second Reading, in which she said that having

“a stiff gin by your side”—[Official Report, 8/6/26; col. 1190.]

is necessary before reading the report.

Nature loss is no longer an environmental issue. It is a national security and market stability risk, and it must be treated with the urgency it deserves. Climate change is accelerating, as borne out last week by temperature records being broken daily. The measured carbon dioxide levels in the atmosphere serve as the single best real-time signal of whether the world, as a whole, is on track to a safe future. It is currently at 430.52 parts per million. Pre-industrial levels hovered at around 280 parts per million and never went above 300 per million. We are in uncharted territory and we need urgent action. I look forward to the Minister’s response to Amendment 142.

Turning to Amendment 172, I again thank my co-signatories, the noble Baronesses, Lady Boycott, Lady Young of Old Scone and Lady Penn, each of whom has been a consistent and persuasive advocate for regulatory coherence in addressing the urgent challenge of deforestation. This is a crisis with profound implications for the health of our planet and for those who depend on forest ecosystems, particularly indigenous communities, which are both their most effective stewards and, too often, their greatest victims. This amendment would introduce three clear and necessary measures.

First, it would require that within three months of the passage of this Act

“the Secretary of State must lay before Parliament draft regulations under Schedule 17 … of the Environment Act 2021”

concerning the

“use of forest risk commodities in commercial activity”.

This provision addresses the unacceptable delay in bringing into force measures that Parliament has already approved five years ago. Secondly, it would ensure that at the point those regulations are laid,

“the Secretary of State must immediately commence”

the statutory review required under Section 79 of the Financial Services and Markets Act 2023. That review is essential to understanding how financial systems intersect with and potentially drive deforestation risk. Thirdly, the amendment specifies that the regulations must include provision for both “due diligence requirements” and

“reporting obligations for regulated persons”.

The intention is straightforward but critical: to place due diligence and transparency at the centre of the regulatory framework. By making these elements explicit, the amendment would signal Parliament’s clear expectation that businesses will be subject not merely to guidance but to enforceable obligations, both to undertake robust supply-chain checks and to report publicly on their compliance. Furthermore, by aligning the introduction of these regulations with the commencement of the Financial Services and Markets Act review, the amendment would promote better co-ordination across government and ensure that market implications, including those for regulated financial institutions, are considered alongside the development of the regulatory regime itself.

As Sir Ian Cheshire, former chair of Barclays and head of the Global Resources Initiative taskforce, noted in his open letter of 23 January 2023, addressed to the then Minister, the noble Baroness, Lady Penn, the then Economic Secretary to the Treasury and Members of this House, “regulating supply chains alone” is not sufficient. He recommended that the Government should make it unlawful

“for financial institutions to invest in or lend to … companies that are unable to demonstrate forest risk commodities have been produced in compliance with ‘local laws’”.

This amendment seeks in part to address that gap. It reflects the compelling case that it is more effective to require financial institutions to undertake due diligence at the point at which finance is first provided, rather than attempting to remedy harms further downstream.

Although I welcome the Government’s recent announcement that Northern Ireland will follow the EU’s deforestation regulations, due to come into force on 31 December 2026, and their stated ambition to align rules across Great Britain with those requirements, the position remains one of stated intent rather than concrete action. The commitment to consult on new regulations requiring larger businesses to ensure that forest-risk commodities are produced legally in their country of origin is a step forward, but it falls short of providing the firm timelines and enforceable measures that are now very overdue. It is, after all, five years since Parliament set out its expectation that illegal deforestation would be addressed in regulation. In that context, Amendment 172 remains both necessary and timely. I hope the Minister will accept that these measures are necessary now, not tomorrow—whenever tomorrow may be. My colleagues and I from across the House will push hard for that acceptance.

Financial Services and Markets Bill [HL]

Baroness Sheehan Excerpts

Report stage
Wednesday 9th September 2026 Lords Chamber

[Baroness Hayman (CB)]

My Lords, I am pleased to follow the noble Baroness, Lady Northover, and will speak to her amendments and my own on this subject in a moment. But first I express my gratitude for the time and effort that the Minister, his colleagues and all the Bill team have put into addressing these issues and attempting to reach exactly the sort of conclusion the noble Baroness referred to.

Perhaps I could first say a few words about the other amendments in this group. I have a great deal of sympathy for Amendments 90 and 97A on forest risk commodities as, over the last five years, we have not made progress in this area. I hope very much that the Minister will be able to give at least a glimmer of hope that this kicking of the can down the road will not continue. I also make clear my support for Amendment 91 from the noble Baroness, Lady Northover, which seeks further clarity from the Government on the issue of green mortgages, which will become even more important as the effects of climate change on the housing market become even more apparent than they are now.

I have Amendment 65, on the timetable for transition plans. We discussed this at length in Committee, but I think that this summer made us all think about our future plans, whether it was to plant more hibiscus and fewer hydrangeas in our gardens, or how to make our homes more habitable with shutters or air conditioning. This summer’s extreme weather has had some very serious impacts, with 2,877 heat-related deaths estimated in May and June alone, 1,000 wildfires raging and disruption and dangers to our transport system causing knock-on impacts to productivity and daily lives. I recognise that transition plans need to be part of a wider programme of action, but if we wait until we have every duck in a row and every avenue explored, we will be leaving a very dangerous gap in progress in this area. I hope that the Government, who recognised in their manifesto the importance of these plans, can give us some sense today of the timetable they see for implementation.

I turn to the amendments dealing with the major and, for many of us, the most concerning issue: the downgrading of the regulatory principles that the FCA and PRA should have with regard to the exercise of their functions contained in Clause 17. The noble Baroness, Lady Northover, has made very clear the arguments—I will not rehearse them—about the risk to financial stability that we already see in the housing and insurance markets, which could go far wider. That is precisely why we fought for and gained, in 2023, the climate and nature provisions that are contained in FSMA 2023. They ensured that these considerations would be taken into account across the regulators’ work and day-to-day functioning, not simply something to be looked at every five years with a retrospective assessment of what had happened and a strategic statement about what might happen next, as is proposed in the current Bill.

The Government have recognised the concern about Clause 17 and have changed their approach to proportionality by putting forward amendments to ensure that it is reflected in the regulators’ annual reporting and day-to-day operations. The issues of climate and nature risk to our financial systems and their viability for the future are just as important, hence my amendment seeking similar treatment for climate and nature risks as for the proportionality regulatory principle and my support for Amendment 34 from the noble Baroness, Lady Northover. The Minister and his officials have, I know, thought very carefully about these issues when we have discussed them since Committee. I hope that today he will be able to recognise their centrality to the future stability of our financial systems and the role that the FCA and the PRA need to play.

[Baroness Sheehan (LD)]

My Lord, I speak in favour of this group of amendments on re-embedding climate and nature considerations into UK financial institutions’ investment decision-making. I speak in particular in favour of Amendments 90 and 97A. I start by thanking the Minister for his constructive conversation with me earlier this week. I am reassured that he shares the ambition to see this through and has the steel to deliver it. The Minister understands the urgency of the risk that climate change presents to the financial stability of the City and he is the right messenger, not least because he used to work for Hermes. Hermes, the messenger of the Greek gods, was known for his great cleverness and speed. He wears winged sandals and carries a staff. I can vouch for that staff.

Amendment 90 in my name was tabled with the support of the noble Baronesses, Lady Young of Old Scone and Lady Coffey, and the right reverend Prelate the Bishop of Manchester. All co-signatories have been long-standing passionate advocates of getting this legislation on to the statute book: it would be patronising of me to thank them when they have already done so much. I am delighted to see the noble Baroness, Lady Boycott, in her place, because she too has been a passionate, outspoken advocate of legislation against deforestation. Amendment 90 would simply require regulations under Schedule 17 to the Environment Act 2021, which refers to the

“use of forest risk commodities in commercial activity”,

to be made within six months of this Act receiving Royal Assent and would commence the Treasury review into deforestation-linked finance.