Climate Change: COP 26

Viscount Waverley Excerpts

Thursday 18th November 2021 Lords Chamber

[Viscount Waverley (CB)]

My Lords, the Government’s export plan, published yesterday, expressed commitment to safeguarding the environment, fostering high-value jobs in a low-carbon economy and fuelling technological innovations that can be exported around the world. A section entitled “Modernising trade” went on to present a vision of

“an enhanced EDG that will allow for longer-term financing for clean growth sector exporters”.

I join in the concerns regarding the Treasury and FCA recognising these lofty ambitions. There is concern that the UK is lagging in the ability to implement such change across the economy. Failure to raise capital for deployment in green projects has now only just begun to be addressed. Even if the Government’s green bonds should be raised, how will this money find its way down for projects? What has been done to combine green projects with the important financing agenda?

Growth by SMEs crucially depends on accessing export finance. UK industry can make an impact to the goals by providing world-leading solutions and products, with entrepreneurs filling the gaps left by banks by being allowed to access finance with less scrutiny from regulators.

Free from European rules, the Treasury and the FCA must encourage capital flows with innovative solutions, not constrain markets with wider regulatory powers. The result of doing so is the growth of the non-bank alternative finance industry and is a reflection of the inability of banks to finance SMEs. Financing for high-input projects, accessing the funding needed, will be hampered unless policy changes are introduced. Companies that cannot get funding in the UK will simply leave, with the resulting brain drain of technology further impeding delivery of COP 26 targets. Many UK companies have already gone to the Frankfurt stock exchange to raise capital, putting pressure on the image of the City as a hub of financial services innovation.

The UK has some of the most innovative alternative financing businesses in the world. The rise of alternative finance, which started with consumer lending, has succeeded in bridging the financing gap but these businesses have seemingly come under attack from the FCA. Policymakers must allow for the flow of capital down to the innovative mid-sized private companies by investing heavily in future technologies through grants and subsidies. Employment, innovation and rebalancing trade require capital and the internal market should be allowed to grow without overreliance on bank financing.