Regulators and investment bodies in the UK have welcomed the proposals set out in the government’s Green Finance Strategy. The document updates the strategy laid out in 2019, and details five key objectives aimed at making the country “the world’s first Net-Zero aligned financial centre”.
Andrew Bailey, governor of the Bank of England, said: “Climate change affects our planet, our economy and our financial system. It is undeniably relevant to the Bank of England and the objectives it is tasked to meet … We are proud to have contributed to, the UK Government’s updated Green Finance Strategy – a strategy that will help to deliver the cross-economy transition that will be required to meet net zero”.
FCA chief executive Nikhil Rathi called the document “an important milestone, building on collective efforts to date and setting out a clear plan for the future” and said “We’re putting the right information in the hands of investors by working closely with the International Sustainability Standards Board”.
Risk management
Charles Counsel, chief executive of The Pensions Regulator, said: “If not properly managed, climate-related risks can have a negative impact on scheme investments, funding, and employer covenants, leaving some savers poorer in retirement … It is crucial that trustees effectively manage material climate-related risks and opportunities for savers, and we will keep our focus on tackling poor standards of governance and risk management in pensions”.
And FRC chief executive Sir Jonathan Thompson said: “Reliable information, free from greenwashing, and subject to high-quality assurance is critical both to public trust and the effective functioning of capital markets and the success of the Green Finance Strategy.”
Industry investment bodies were similarly positive. James Alexander, chief executive of the UK Sustainable Investment and Finance Association (UKSIF) particularly welcomed “consultation on climate transition plans for large listed and private companies, steps to promote international interoperability of rules through an assessment of the ISSB’s standards, and a clearer framework for how the UK can become the world’s first net-zero financial centre”.
Fiduciary duty
He also said “it is very welcome to see consideration given by government to clarification to fiduciary duty. We are optimistic that this could help address the present confusion we see among pension schemes and more widely, and how environmental, social, and governance (ESG) risks, opportunities, and impacts should be considered as part of these duties”.
UK Finance chief executive David Postings said: “Providing a clearer path to net zero and mobilising investment through the Green Finance Strategy is crucial to enable the banking and finance industry to help deliver a just transition to a more sustainable economy. We have long called for further steps to green the housing stock and welcome the government’s pledge to increase energy efficiency as part of the Great British Insulation Scheme.”
Dr Rhian-Mairi Thomas, CEO of the Green Finance Institute, said: “While the first Green Finance Strategy focused on planning and targets, this one is about delivering capital to finance our climate and nature goals … Today’s announcement broadens our mandate to work with government and the market to accelerate the mobilisation of capital to restore and protect nature as well as to decarbonise critical sectors”.
Sustainable Development Requirements
In a separate, and less widely reported, update, the FCA announced it was postponing the implementation of its Sustainable Development Requirements (SDR) due to the “significant response” to consultation on them. The aim of the SDR was to tackle greenwashing and it had been scheduled to come into force on 30 June.
The FCA now says it intends to publish policy in Q3, after receiving 240 written responses. It indicated policy would also cover marketing restrictions and refining labelling criteria. Other comments from the regulator indicate the results of its review of and code of conduct for ESG data providers could be included in the Policy Statement.
The regulator’s update said: “We have sought international coherence with other regimes and will continue to consider how to further support compatibility, while emphasising that we need robust standards for the UK to remain at the global forefront of sustainable investment.”