Financial Services and Markets Bill

Baroness Young of Old Scone Excerpts

Committee stage
Monday 30th January 2023 Grand Committee

That is why I support these amendments. It is important that the net-zero aspects are not given a lower billing than growth and competitiveness. That would send the wrong message. Just “having regard” to net zero is not enough. As I have said, I do not believe there is any real conflict—quite the opposite, if done well. Good financial regulation in this area should help the UK become a global leader in the exciting technologies and businesses of the future, driving both growth and competition, so I urge the Government to accept them.

[Baroness Young of Old Scone (Lab)]

My Lords, I very much enjoyed what was just said by my fellow countryman. I will talk to Amendment 69 in the name of the noble Baroness, Lady Sheehan, which I have also put my name to. The amendment adds nature to the new regulatory principle on net-zero emissions. I also recognise everything that the noble Baroness, Lady Hayman, said about needing an objective rather than a regulatory principle. However, if we are to be stuck with a regulatory principle, it needs to address the twin existential crises we are facing globally and as a nation: climate and nature decline.

I must confess that I was kind of taken aback by the two previous speakers. The fact that climate and nature are such major things and go hand in hand, with one not being able to be resolved without the other, is now so commonly recognised globally by the business and financial communities and by Governments that I felt there was a whiff of quill pen coming from the other side, which is most distressing. The reality is that our financial institutions have a key role in enabling the financing of decarbonisation of the economy but also in promoting nature-based solutions. It is partly about making sure that the natural environment is lending its full hand to solving the climate change crisis, because we need every lever in the kit—every tool in the toolbox—to step up to that challenge. The financial institutions have a key role in that.

However, we also already have government commitments on the natural environment in this country: the Environment Act targets. That was the first time we have had statutory nature conservation targets in this country, which the Environment Act introduced and which become binding on government at midnight tomorrow night. We have to recognise that, if we have big bucks that are directed by the financial institutions and by investment, they absolutely have to tackle both climate change and nature conservation.

We should not look at this as a sort of dead-weight cost on the regulatory process or the financial markets because these investments in nature and climate are vital for our future economic growth. They are the heartland of our future economic growth; the jobs of the future are green jobs. We are behind the curve at the moment; the director-general of the CBI and others are all commenting that we are falling behind and losing our international competitiveness because we are not being vigorous enough in getting investment streams into climate change and nature. So we need the regulators to drive green growth and green investment really hard, for both net zero and nature recovery, to give businesses the confidence to invest.

These are very big bucks: the director-general of the CBI was absolutely clear that, in the past two years, the UK has lost its market share in green tech, which is equivalent to a potential value of £4.3 billion by 2030. Globally, an estimated $32 trillion of investment is needed by 2030 just to tackle climate change. So we are talking about big bucks, big investment, big jobs, big economy and big growth, and we were on it until a very small number of years ago. We have to get back on it to be able to hold our heads up in the international economic community.

So I hope that some of the things I have heard tonight are not government policy and that the Government are still absolutely clear about their commitment to action on the twin crises to turn them into opportunities. So, if the amendment moved by the noble Baroness, Lady Hayman, on regulatory objectives is not adopted, I ask the Minister at least to ensure that the regulatory principles reflect that commitment.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I had not intended to speak on this subject, but I very much agree with everything that has been said, especially by the noble Baroness, Lady Young, just now, about the lost opportunity if we do not take climate change and embedding it in financial services seriously. ESG investing is the big growth area at the moment, and what message are we giving if we say, “Well, we’re not really that interested in the ‘E’”? I am not sure about the “S” and the “G” either. We will potentially lose out.

It is not as if this will be an environmental tax on every business, or as if it has to be woven into every last little bit of financial services, like some chain round their neck. I spend some time looking at the general duties of the regulators, and, if I were to say anything about the positioning of this, I would say that it is not necessarily high enough up in the hierarchy because it is entirely forgettable within the layering that we have. I object to the notion that we are still in an era where we can do damage and compensate; you cannot compensate for a ruined planet. That is very much old thinking. It is almost centuries old in my book.

The FCA’s general duties state:

“In discharging its general functions, the FCA must, so far as is reasonably possible, act in a way which … is compatible with its strategic objective and … advances one or more of its operational objectives.”


What we are talking about here is a secondary operational objective, but the whole thing could be forgotten. If you ask me, it should be in the strategic objective, which is the only thing that cannot be rubbed out, because that is where we are at. We can go through this lovely list. Integrity gets rubbed out when it comes to SMEs—we have been through that debate—so climate things will be rubbed out if you want to be one of the rough-and-tumble financial firms that wants to deal with gas and oil exploration. Money is needed for that to work it all through and make sure that there are no stranded assets.

What is the big problem with what I would call a measly secondary objective? I understand the competitiveness and growth objective, which seems to be liberally sprinkled throughout to try to give it some kind of priority, but you have to balance that with sustainability in its broadest sense. All these things are about balance. We cannot have a Climate Change Act that says we will do things and then just ignore it in our biggest industry. It is the biggest case out there and we need something on it here. I will look at this again on Report and the Minister jolly well knows where I will put it.

Financial Services and Markets Bill

Baroness Young of Old Scone Excerpts

Report stage
Tuesday 6th June 2023 Lords Chamber

[Baroness Young of Old Scone (Lab)]

My Lords, I support Amendment 15 in the name of the noble Baroness, Lady Hayman, who introduced it very powerfully. I want to talk to the House about the real relationship between nature conservation and climate change and the need to bring those together in the regulatory process. Nature restoration is essential for our reaching of net zero—we cannot do net zero without restoring nature; I think that is globally accepted now—but nature restoration is important to economic prosperity in several other ways. More than half of global GDP is considered moderately or highly dependent on natural assets and half the world’s population is completely dependent on biodiversity for their livelihoods. That means that biodiversity is as important as climate change.

Biodiversity is also highly material in assessing risk, including financial and economic risk, and it is pretty clear that if biodiversity is going down the tubes, so is the economy and, indeed, so are we. So, it is a bit of a no-brainer, in my view, that financial services regulators should have, as a regulatory principle, net zero and nature recovery together: the two are absolutely indissolubly linked. I hope the Minister will not say that the provisions that are in the Bill for net zero will act as a proxy for biodiversity restoration. It does not work that way: net zero is a necessary condition but not a sufficient condition for biodiversity recovery.

The noble Baroness, Lady Hayman, threatened the House with simply reading out all the commitments that have already been made that are encapsulated in her Amendment 15. I want to add another one that no one has mentioned so far. The Environmental Audit Committee, in its report on biodiversity in June 2021, highlighted the fact that, although some progress had been made in transforming the financial system to reflect the pressures of climate change, the whole accompanying handshake with biodiversity was way down the line and much slower and needed to accelerate. It called on the Government to play a part in creating a narrative that there is a lot of international commitment to biodiversity recovery linked with climate change that we are going to have to respond to in this country, because we have signed up to it globally, and that it is therefore important to get the financial services industry and its regulation up to speed soon in order to cope with that global pressure. The noble Baroness’s Amendment 15 would do that and, more importantly, it would secure this through a legislative approach and not be overly reliant on voluntary action.

Without delaying the House any longer, I also support Amendment 91 on deforestation. I will not repeat what the noble Baroness, Lady Boycott, said, but it was the bee’s knees. I end with a note of distress at the comments made by the noble Lords, Lord Davies and Lord Naseby, about pension scheme investments and investors and pension committees and pension advisers’ responsibility and duty to pensioners. I declare an interest, having set up the Environment Agency pension scheme some 25 years ago to be, at that stage, the only really green pension scheme and now probably the foremost green pension scheme in the world.

Let us not be in any doubt: there is not a dichotomy about responsibility to pensioners and taking action on climate change and biodiversity. They are absolutely one and the same thing. If climate change and biodiversity decline continue, there will be irreparable harm to the economics that pensioners and pension schemes depend on. Let us not be in any doubt about that: pension scheme trustees and their advisers—and I hope, if the Minister will accept Amendment 15, their regulators—have a responsibility towards climate change and biodiversity recovery, because it is absolutely in the economic interests of their beneficiaries.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise very briefly to express Green support for the non- government amendments in this group and acknowledge the way in which the weakness of the government amendment has already been acknowledged. Noble Lords will note that the explicitly environmental amendments, from Amendment 15 onwards, do not have a Green name on them. I am delighted about that because there was not space for one, because the amendments have cross-party support from right across the House, which really shows how far we have come in these debates.

I shall make four brief points, because I am very aware of the time. They are building on the points just made by the noble Baroness, Lady Young, and reflecting on an article published last week in Nature, which demonstrated that in seven of eight key measures, including climate, biodiversity and water, we are outside the safe and just operating space of this planet. We are absolutely at crisis point and I pick up the point made by the noble Baroness, Lady Hayman, that we cannot afford to wait. We cannot wait for the next Bill, the Bill after that and the Bill after that. I very much agree with the point just made by the noble Lord, Lord Vaux, that the country should not have to wait for the House of Lords to insert these things into Bills; they should be there in government Bills as a matter of absolute, basic course.

I have a particular point about Amendments 93 and 113, which strengthen the fiduciary duty of pension funds to ensure investors consider the impact of their investments on environment and society. The case has already been made that there is no finance on a dead planet and there are no pensions on a dead planet, but the society element also deserves to be noted. We have had a huge amount of discussion of the problem of the large number of people of apparently working age who are not engaged in our labour force at the moment, and the public health crisis that is associated with that. It is the kind of thing that Green councillors have been going on about, as members of governing boards of pension funds for years: such things as tobacco and the kinds of food products that are being supported are all issues that have an impact on pension returns.

On deforestation, the noble Baronesses, Lady Meacher and Lady Boycott, among others, have already made points about this, but there is £300 billion of UK pension money in high deforestation risk companies and financial institutions—that is a figure from Make My Money Matter. Again, there is a point about risk. The financial sector in the UK faces up to £200 billion of risk in Brazilian beef and soya and Indonesian palm oil supplies alone.

Finally, there is another risk in terms of our international reputation. We are of course enthusiastic signatories of the global biodiversity framework, which promises, under target 14, that the UK will align

“all relevant public and private activities, [fiscal] and financial flows with the goals and targets of this framework”.

How could the Government not be accepting all the amendments in this group?