Financial Services and Markets Bill – in a Public Bill Committee at 2:00 pm on 3rd November 2022.
“(1) The Treasury must lay before the House of Commons an updated Green Finance Strategy within three months of the passing of this Act.
(2) The strategy must include—
(a) a Green Taxonomy, and
(b) Sustainability Disclosure Requirements.
(3) In preparing the strategy, the Treasury must consult—
(a) financial services stakeholders,
(b) businesses in the wider economy,
(c) the Secretary of State for Business, Energy and Industrial Strategy, and
(d) the Secretary of State for Work and Pensions.
(4) In this section a ‘Green Taxonomy’ means investment screening criteria which classify which activities can be defined as environmentally sustainable including, but not limited to—
(a) climate change mitigation and adaptation,
(b) sustainable use and protection of water and marine resources,
(c) transitions to a circular economy,
(d) pollution prevention and control, and
(e) protection and restoration of biodiversity and ecosystems.
(5) In this section ‘Sustainability Disclosure Requirements’ are the requirements placed on companies, including listed issuers, asset managers and asset owners, to report on their sustainability risks, opportunities and impacts.”—
This new clause would require the Treasury to publish an updated Green Finance Strategy. This must include a Green Taxonomy and Sustainability Disclosure Requirements.
I beg to move, That the clause be read a Second time.
Members will be happy to hear that this is my final speech. The new clause would require the Treasury to publish an updated green finance strategy that must include a green taxonomy and sustainability disclosure requirements. The Opposition welcome the provisions in the Bill that formalise the responsibilities of the FCA and the PRA under the Climate Change Act 2008, which was introduced by the last Labour Government, but the Government have promised much more radical action. Indeed, we were promised that the UK would become the world’s first net zero financial centre; instead, we are falling behind global competitors. Too often British businesses, especially small and medium-sized enterprises, struggle to access the green capital they need. Not only has that damaged growth; it has made us more reliant on foreign fossil fuels and has directly contributed to the record levels of inflation that are strangling our economy.
I remind everyone that the Prime Minister had to be publicly shamed, including by the former Secretary of State for Business, Energy and Industrial Strategy, before committing to attend the COP27 summit. A Labour Government will give the clear direction that the sector needs by providing £28 billion of green capital investment every year until 2030. That will include investment in gigafactories to build batteries for electric vehicles, a thriving hydrogen industry, offshore wind with turbines made in Britain, planting trees, building flood defences, getting energy bills down, and guaranteeing Britain’s energy security by supporting the expansion of nuclear power.
Alongside the confidence that investment can bring, we must provide regulatory certainty to the sector. That will require internationally agreed definitions and regulatory standards on green finance. The Minister will agree that the FCA and the PRA are highly respected and influential on the world stage, and they can play a leading role at various global regulatory forums in setting the pace of change to ensure that the UK is a leader in green finance. However, that will require a concrete green finance strategy for regulators and the sector to work towards, and a clearly defined green taxonomy and sustainability disclosure requirements, to ensure that the City can fully support the transition to net zero. I look forward to hearing the Minister’s comments, and I hope he will vote with us to give financial services the confidence they need to make the UK the global centre of green finance.
It is a pleasure to speak with you in the Chair, Mr Sharma. I will keep my comments brief.
I had not intended to speak on the new clause, but the hon. Lady made a really important point about access to green finance, particularly for SMEs. The Black Country chamber of commerce, which does fantastic work with SMEs, has raised this issue with me. If businesses want to access green finance, particularly through some of the fantastic Government support schemes that were put in place two years ago, they are unable to do so if they do not meet the relevant threshold. Many SMEs have ambitions to be part of the green industrial revolution, and many of us in this room represent post-industrial communities that could transform the energy infrastructure in this country, but which do not have the means to access the finance that is needed to do so. As a result, many communities are missing out on what we might call the fourth industrial revolution, which could bring new skills, new jobs and new investment to those areas.
The purpose of the new clause is very interesting. Perhaps the Minister can address that when he sums up. I apologise to him, because he has had a plethora of asks from me during our proceedings. However, this point is important, because we have many well-established SMEs across the country—including in my area, the Black Country—that are really keen to be part of the journey.
Some of the provisions in the new clause, particularly on the green taxonomy, are interesting in relation to how we will ensure that SMEs play a part in sustainability. I would be keen to discuss with the Minister, perhaps outside the Bill Committee, how we can ensure that that happens, even if it is outside the purview of the new clause. The hon. Member for Hampstead and Kilburn has raised an interesting point: how we can ensure that everyone benefits from green financing and sustainability? The infrastructure in this country is ready to go, but the missing link, certainly from what I have experienced in my constituency, is how we enable fantastic, well established SMEs that have the will and the expertise to get to the next level. I am interested to hear the Minister’s comments on that.
New clause 9 would require the Treasury to lay before Parliament an updated green finance strategy within three months of the Act passing. It specifies that that must include details on the UK green taxonomy and sustainable disclosure requirements. I am grateful to the hon. Member for Hampstead and Kilburn for tabling the new clause and giving us the opportunity to set out the Government’s position on those important issues.
The Government are committed to reaching net zero greenhouse gas emissions by 2025. The Bill underlines that commitment by introducing measures under which the financial regulators must consider the need to achieve compliance with the net zero emissions target as they advance their objectives.
As part of our efforts to achieve the target, the Government and the regulators have under way an ambitious programme of work, which seeks to support the competitiveness of the UK in sustainable finance. During a previous sitting, we heard the hon. Lady talk down the United Kingdom and say that we are falling behind, and she just repeated that. She lives in a world where the UK is, sadly, always falling behind and where we are never able to celebrate our successes.
I will, but let me finish this point, because the hon. Lady may want to respond to it. Following the accusation that we were falling behind Germany and France, I undertook some research. I do not know whether she is familiar with the global green finance index, which is in its 10th year, but for the third successive year, it ranked the United Kingdom—London—highest in the world for green finance. It is far above either Paris or Frankfurt. When I give way, she may want to say—I will give her this copy of the document—whether she is familiar with the index and whether it informed her comments on the subject.
Does the Minister believe, hand on heart, that his Government are doing enough for green finance? Does he believe that they have delivered on every pledge that they have made?
I note that the hon. Lady declined to indicate her familiarity with the global green finance index, but I am very pleased to furnish her with my copy—regrettably, it is a hard copy. Of course, we can always do more, and we shall.
The Minister’s comments about the green finance index are positive and I know his commitment to that agenda. He said we will do more. Will he reassure me that the benefits will be spread regionally and that he will ensure that the investment goes into areas that can turbocharge that agenda? I made this point earlier, but will he reassure me that he is committed to exploring the idea of maximising regional investment when it comes to green finance?
I give my hon. Friend that reassurance. It is imperative that the opportunities are fully seized, not just for SMEs, but for the transition economy. That is incredibly important for new nuclear, which has an important role to play. It is important that we get this right.
I really am happy to get a present from the Minister, but I draw his attention to the evidence from William Wright of New Financial that in 2021 roughly 20% of all capital markets activity in the EU was green, but in the UK the proportion was 9%. The Minister is talking a lot about how well his Government have done; what assessment has he made of the reasons behind that gap? Does he have an answer to what William Wright told us? Or is he going to give me another present?
I will certainly give William Wright a copy of the report.
I am not as familiar with the work of William Wright as I am with the work of the respected publishers of that report, now in its 10th year. However, I will ensure that as well as supplying Mr Wright with a copy of that brilliant piece of work, I shall undertake to understand a little bit more and see what we can learn from the evidence he gave. I am happy to write to the hon. Lady with what I learn from that, because this is not a position in respect of which we have a significant difference of views, and the Government—I hasten to say—continue to make more progress.
We published the green finance strategy back in 2019, and “Greening Finance: A Roadmap to Sustainable Investing” in 2021. Since then, because of the changes to the economic and political landscape, the Government have commissioned my right hon. Friend Chris Skidmore to lead a rapid review of how the Government approach delivering their net zero targets in the appropriate way. In addition, a call for evidence was launched on
The hon. Member also mentioned specific policy issues relating to the green taxonomy and sustainable disclosure requirements, on which I hope I can give some reassurance. On the green taxonomy, the Government will be engaging with the market on the design of a framework to guide investors on how they can best support the transition to net zero. That includes the important role for SMEs that we heard about from my hon. Friend the Member for West Bromwich West.
Sustainability disclosure requirements are an area in which the UK is already genuinely leading the world: we are the first country to seek to mandate them. We were the first G20 country to introduce regulations for mandatory reporting, aligned with the recommendations of the task force on climate-related financial disclosures. SDR builds on that approach: the aim is for it to be a comprehensive, streamlined and co-ordinated reporting framework for all statutory and public listed bodies, and it is being taken forward at pace. As the hon. Member for Hampstead and Kilburn probably knows, the FCA launched a consultation last week on SDR rules for asset managers and asset owners, which included how to address the important, growing issue of greenwashing.
I hope I have reassured the Committee about the comprehensive amount of very thorough work being done by the Government in this domain. As I have given the assurance that the hon. Member seeks through her new clause, I ask that she withdraw it, not push it to a Division.
After that performance, I have even less confidence in the Minister. He is being increasingly complacent in his attitude and I firmly believe that the Government lack ambition in this policy area. We need an updated green finance strategy, and if the Minister does not see what I am seeing in what is happening around the country, he needs to reconsider his position on this topic. I will definitely push my new clause to a Division.