Bank of England and Financial Services Bill [HL]

Lord McFall of Alcluith Excerpts

Wednesday 11th November 2015 Lords Chamber

Moved by

[Lord McFall of Alcluith]

29A: After Clause 23, insert the following new Clause—
“Listings rules sustainability report
(1) Within one year of the coming into force of this Act, and annually thereafter, the Financial Conduct Authority shall prepare and publish an assessment of how listings rules contribute to the UK’s sustainable economic growth.
(2) In this section, “listings rules” means rules deriving from Part 6 of the Financial Services and Markets Act 2000, and rules governing markets designated as recognised growth markets by HMRC.”

[Lord McFall of Alcluith (Lab)]

My Lords, I rise to move the amendment in the name of my noble friend Lady Worthington who, unfortunately, cannot be with us today. Amendments 29A and 29B seek to introduce two new clauses, “Listing rules sustainability report” and “Power to require long-term sustainability reporting”.

In a Bill that deals with financial services, we would be remiss if we did not debate how we can best promote the long-term sustainability of an industry that contributed almost £127 billion of gross value added to the UK economy and supported 1.1 million jobs directly and indirectly in 2014.

Both these amendments are probing amendments. Amendment 29B would require the specification of accounting standards for the disclosure of exposure to the financial risks associated with climate change—an issue that Governor Carney has spoken about very recently. Amendment 29A sets out a requirement for the listings authorities to report on how the rules arrangements governing our financial markets relate to sustainable growth.

The need for the effective disclosure of the carbon intensity of assets is widely supported, and according to the Bank of England there are already 400 such schemes internationally. The problem is that each initiative varies in status, scope and ambition, and as Governor Carney has said recently,

“The existing surfeit of schemes and fragmented disclosures means a risk of getting ‘lost in the right direction’”.

Amendment 29B calls for uniformity and clarity of reporting standards so that our financial services industry has the right information to make the right decisions when investing clients’ money.

The UK is uniquely placed to lead on this issue, given the size and importance of our financial services industry. That is why it is important that we look at all means to ensure its long-term sustainability. Amendment 29A does this by asking the FCA to prepare a report into the effect of listings rules on sustainable growth. In particular, it would shine a light on to our “recognised growth markets”, such as the Alternative Investment Market.

The AIM is designed to support new, high-growth and innovative enterprises which would otherwise struggle to meet the requirements to list on the main market, and it encourages investment with income tax, capital gains tax, stamp duty and inheritance tax reliefs. However, this market also allows well-established extractives to list their shares here, avoiding tougher regulation and allowing companies such as Coal of Africa—an Australian mining firm with a history of sacking striking workers—to list its securities on that market. In a time of austerity, we should be looking at the regulation of our financial services industry and markets to ensure that they are encouraging the sustainable growth that we need. I ask the Minister to consider these amendments.

--- Later in debate ---

[Lord Bridges of Headley]

As always, my noble friend makes a perceptive point. As I said, I do not want to prejudice the outcome of the discussions that will likely take place. Obviously, my noble friend makes a good point. I simply make the point in return that, in the case of disclosure, we want to try to make sure that this is as internationally recognised as possible. I heed what he said and will no doubt make that point to those who will be present at that discussion.

On primary issuances, the relevant regime is the prospectus directive—which is currently under review. We are working closely with the European Commission and other European partners to achieve a positive outcome on that. We look forward to hearing any suggestions on how to improve this regime. I thank the noble Lord—and the noble Baroness who sadly is not with us—for this amendment. I hope what I said gives some reassurance that the Government take this issue seriously, but I ask the noble Lord to withdraw the amendment.

[Lord McFall of Alcluith]

My Lords, I beg leave to withdraw the amendment.

Amendment 29A withdrawn.