Commons Sense

House of Commons · Westminster Hall

Greening the Financial System — [Mr Peter Bone in the Chair]

30 November 2022 · 7 other contributors · 9,856 words

Opened by Olivia Blake Lab Sheffield Hallam

Responding minister: James Cartlidge

TaxationClimate

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Olivia Blake raised concerns about greening the financial system — [mr peter bone in the chair] in Westminster Hall. A government minister responded.

Key points

  • Financial assets globally are expected to reach $140.4 trillion by 2025, with UK pension assets at nearly 3 trillion.
  • The 100 richest companies are responsible for over 70% of global emissions, and three largest asset managers have 300 billion in fossil fuels.
  • Since the Paris agreement, banks have financed fossil fuel projects totaling $3.8 trillion.

Key requests to Government

The Financial Services and Markets Bill should aim to enhance the competitiveness of the sector but also align financial flows with clean growth. It should move more rapidly on instituting mandatory net zero transition plans for financial institutions, raise capital requirements on fossil-fuel investments, and expand the concept of fiduciary duty.

How the debate unfolded

MPs spoke in turn to share their views and ask questions. Here's what each person said.

Opened the debate

Olivia Blake Lab Sheffield Hallam

The financial system is not serving the interests of people or planet. The volume of privately invested financial assets globally is expected to reach $140.4 trillion by 2025, with UK pension assets amounting to almost £3 trillion. However, just 100 richest companies are responsible for over 70% of all global emissions and the world's three largest asset managers have a combined £300 billion invested in fossil fuels. In the five years since the Paris agreement, banks financed fossil fuel projects to the tune of $3.8 trillion. The City of London would be the ninth largest polluter if it were a country.

Other contributors (7)
  • Alan Brown SNP Cowdenbeath

    Mr Alan Brown highlighted the scale of investment needed for climate goals, noting that the City of London is equivalent to the ninth biggest polluter in the world. He stressed the importance of pension funds considering wider beneficiary interests and not just returns. The member also pointed out the critical need for energy efficiency investments and mentioned that more than 1,007,000 properties would need to be upgraded annually by 2030 if every property is to reach EPC band C. He emphasized the risk of greenwashing and the necessity of a joined-up Government strategy.

  • Alex Sobel Lab Co-op Leeds Central

    My hon. Friend is making an excellent speech, suggesting that a better regulatory environment could create green financial opportunities. We need regulation to encourage private finance into this area.

  • Alexander Stafford Con Ruislip-Northwood

    Congratulated Olivia Blake for securing the debate and expressed the need to work together on green finance. Declared interest as chair of the APPG on ESG, discussing the upcoming UK green taxonomy report which aims to prevent greenwashing by clearly classifying sustainable economic activities. Highlighted the importance of speed in developing the taxonomy while ensuring it is robust, consultative, credible, and internationally focused. I invite the Minister to attend the all-party group meeting to discuss the report with our members as a priority.

  • Chris Grayling Con Arundel and South Downs

    I am concerned about the impact of financial investment in countries and organisations involved in deforestation. The City of London and our financial services sector should face due diligence requirements similar to those for retailers under the Environment Act 2021.

  • Jim Shannon DUP Strangford

    Mr Jim Shannon praised initiatives like the UK Prime Minister's Ten Point Plan and welcomed strategies aimed at greening financial systems. He highlighted Northern Ireland's efforts to decarbonise, noting steps taken by banks such as Ulster Bank towards green finance. Shannon also raised concerns about nature loss and investments in destructive practices in the Amazon rainforest. He questioned the Government on discussions with Brazil regarding these issues.

  • Kerry McCarthy Lab Bristol East

    Ms McCarthy emphasised the need for stability and clear direction from the Government to encourage investment in green infrastructure. She highlighted the importance of addressing market confidence issues, such as past policy changes affecting energy efficiency programmes, onshore wind projects, and solar subsidies. Ms McCarthy also called for more private sector investment in EV charging points through government support.

  • Matt Rodda Lab Reading Central

    Mr Rodda praised the potential contribution of the pensions industry in reducing carbon emissions through wise investment. He highlighted a solar farm built on reclaimed land near the M4 and stressed the need for Government policy support to encourage more such projects, especially regarding onshore wind and solar investments. He urged the Minister to provide clearer guidance and reassurance to pension funds about the benefits of green energy investments. Described the failure of the Government to provide adequate home insulation for older people living in terraced houses, calling it a tragedy.

Government Response

James Cartlidge

It is a real pleasure to serve under your chairmanship, Mr Bone. I congratulate the hon. Member for Sheffield, Hallam on delivering an eloquent speech on an important subject and make clear our commitment to climate change accounting in financial decisions with the introduction of mandatory Task Force on Climate-related Financial Disclosures (TCFD). The UK aims to build on TCFD rules with new Streamlined Disclosure Rules (SDR) to incorporate international sustainability standards. Transition plans are a key part of SDR, and we launched the Transition Plan Taskforce (TPT) to create gold standard for transition planning, with consultations set out clear recommendations for high-quality transition plans. More than 70% of UK public want investments avoiding harm and achieving good for people and planet; in 2020, UK savers put almost £1 billion a month into responsible investment funds. The Financial Conduct Authority's (FCA) consultation on SDR aims to promote integrity and trust in the market, protect consumers and reduce greenwashing risks. The UK kick-started a greening finance programme with record-breaking debut sovereign green bond last September, raising more than £22 billion from green gilts and retail green savings bonds since September 2021. This financial year, we plan on raising an additional £10 billion from green gilts, worth £6 billion so far. The UK Infrastructure Bank (UKIB) has £22 billion of capital to invest in infrastructure tackling climate change and levelling up the UK; based on its 10 investments announced so far, it estimates that it has already crowded in £4.5 billion of private investment. On transparency for financial sector disclosure of nature-related financial risk, we are the largest financial backer of the taskforce on nature-related financial disclosures supporting work developing a framework for financial institutions and corporates to assess and report on their nature-related dependencies, impacts and risks.

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