Financial Services and Markets Bill

Debate between Baroness Young of Old Scone and Baroness Bowles of Berkhamsted

Committee stage
Monday 30th January 2023 Grand Committee

[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.