Question to the Department for Business, Energy and Industrial Strategy:

To ask Her Majesty's Government what assessment they have made as to whether voluntary pledges by the UK financial sector will be sufficient to ensure that sector's carbon emissions are reduced in line with the goals of the Paris Agreement.

The UK was the first major economy to commit to Net Zero by 2050, and to achieve that ambition, we want to ensure that every financial decision takes climate change into account. This will require a drastic increase in the quantity, quality and comparability of climate-related disclosures. That is why, in November 2020, my Rt. Hon. Friend Mr Chancellor of the Exchequer announced the UK’s intention to make disclosures in line with the recommendations of the Task Force for Climate-related Financial Disclosures mandatory in the UK across the economy, including the financial services sector, by 2025. This commitment is world-leading and significant progress towards achieving our ambition, including new requirements for premium-listed firms to disclose their greenhouse gas emissions, has already been made.

We have committed to implementing a green taxonomy that will establish a common definition for ’sustainable economic activities’ and improve understanding around the impact of firms’ activities and investments on the environment. Together, these measures will ensure that firms across the whole economy are disclosing robust and comparable climate and sustainability-related information that is decision-useful for investors. This will help close the sustainability data gap, as well as preventing greenwashing and supporting the greening of the UK economy.

Finance is one of the four over-arching goals of the UK Government’s COP26 Presidency. At the core of the COP26 finance campaign is the creation of a private finance system for net zero. This entails building a virtuous cycle of innovation and investment, making sure that policies, business plans and investment decisions all align with net zero targets. As a result, we are already seeing very positive momentum within the private finance sector. For example, the Glasgow Financial Alliance for Net Zero has secured commitments from 160 firms (together responsible for assets in excess of $70tn) across the global financial system to accelerate the transition to net zero emissions. All members must be accredited by the UN Race to Zero campaign and use science-based guidelines to reach net zero emissions, covering all emissions scopes (including a 2030 interim target). Hence, there is already a large push for voluntary setting of net zero targets by financial institutions.