Sophie Lethier’s November parliamentary update covers her analysis of the Chancellor’s Spending Review and an update on the Pensions Schemes Bill and Financial Services Bill.
This month saw the Prime Minister announce unprecedented measures to tackle the climate crisis through his ‘ten point plan’. It was encouraging to see the UK position itself as a climate and green finance leader ahead of its COP26 Presidency. But what really matters is the policy detail behind the soundbites.
Green finance updates from the Chancellor
The Chancellor announced several green finance measures on 9 November, including a green sovereign bond and a new green taxonomy following the UK’s exit from the EU.
He also announced TCFD aligned mandatory disclosure by 2025. This should be celebrated, but many will be pushing for what comes after disclosure, and for plans that require companies to disclose their strategy to meet the UK’s Net Zero target.
The Spending Review last week was a chance to harness the green stimulus opportunity that could set the UK on course to meet its climate targets. Some announcements were welcome, but it did not set out a comprehensive road map to a green recovery.
As Professor Rebecca Willis commented, tackling the climate crisis is “about making sure all money and all policy is compatible with a net zero transition”. By this measure, the Spending Review failed to deliver what is truly needed.
While news of a national infrastructure bank is welcome, the details matter greatly before we hail this initiative as the green investment bank 2.0. Will it help to deliver the Government’s large road building plans, seen as inconsistent with both the science and spirit of the UK’s climate and environment targets?
Or will it help to create new markets to crowd private finance and enable the transition to fully sustainable infrastructure? (UK100 and Siemens published an insight report in July setting out the potential for a Net Zero development bank with a green mandate.)
In sum, do the Chancellor’s November announcements represent significant steps in the right direction? Absolutely. Is this level of ambition enough to meet Net Zero emissions by 2050? No.
Green finance legislation update
The Pensions Schemes Bill completed its final stages in the Commons, reporting to the House on 26 November. It has now gone back to the House of Lords for consideration of the Commons amendments, also known as ping pong.
To the disappointment of campaigners, the Pensions Minister Guy Opperman recently reinforced the Government’s position that it would not seek to mandate Paris Climate Agreement alignment in pensions schemes, due to a concern it could lead to divestment.
An opposition amendment speaking to this was unabated at the Commons report stage of the Bill. It was narrowly defeated, with some MPs voicing concerns that it would force schemes to divest from high carbon companies.
In fact, ‘Paris alignment’ allows for a much more nuanced approach. Pension schemes could achieve it, for example, by engagement with these companies, or by diversifying their portfolios to include green energy companies as well.
The Financial Services Bill entered committee stage this month. Like much of the legislation introduced to Parliament in recent years, the Bill aims to plug regulatory gaps resulting from the UK’s exit from the EU.
As it stands the Bill makes no mention of climate change, despite being introduced in the Commons following the Chancellor’s announcement on green finance on 9 November. Giving evidence as an expert witness, Director of Positive Money Fran Boait argued that ESG factors should be at the heart of this Bill.
She said: “It is worth noting that the UK’s financial institutions are among the worst culprits in Europe for fossil fuel financing… If the UK really wants to be a leader in green finance in a serious way, we need our regulators to be on board with that mission.”
The Commons committee stage of the Bill continues on Tuesday 1 December.
Sophie Lethier, Parliamentary Officer