Financial Services Bill — House of Lords, 2021-01-28
Topic: Macroeconomics
Jonathan Oates (Liberal Democrats, Centre to centre-left): My Lords, I congratulate the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik, on their excellent maiden speeches. I look forward to the important contributions they will both undoubtedly make to the House On Monday 9 November last, the Chancellor made a Statement to the House of Commons in which he set out the Government’s vision for financial services. He pledged, as the noble Baroness, Lady Hayman, reminded us, to put "the full weight of private sector innovation … behind the critical global effort to tackle climate change and protect the environment."—[Official Report, Commons, 9/11/20; col. 621.] Just two hours later, his colleague, the Economic Secretary to the Treasury, John Glen, got to his feet to introduce the Second Reading of this Bill. In his opening speech, which lasted over 25 minutes, he did not refer to the climate and ecological emergency once. He made no mention of green finance, climate risk disclosure or the critical role the financial services industry will have to play if we are seriously to tackle climate change The omission of any reference to climate change, replicated by the Minister this afternoon, was not the result of an oversight on the Economic Secretary’s part. Far from it; it was simply a logical consequence of the fact that the Bill does absolutely nothing to address the climate emergency we face. The Economic Secretary had a number of answers for this failure when he got around to the matter in Committee. First, he argued that these issues were not relevant for discussion, as they were not directly related to the Bill—a strange and circular argument, as their absence from the Bill was precisely the complaint he was addressing. Secondly, he argued that the regulators were making progress on climate-related issues and we should let them get on with it. Finally, he said: "The Bill grants the Treasury a power to specify further matters in the accountability framework at a later date, which could be used to add a requirement to explicitly have regard to green issues in the prudential framework, if appropriate … I can assure the Committee that the Treasury will carefully consider a green ‘have regard’ in the future."—[Official Report, Commons, 24/11/20; col. 157.] Essentially, he was telling Parliament, "It’s not for you to worry your little heads about these things, and to ensure that you don’t have to, the Bill will take the powers away from Parliament in this regard and vest them in the Treasury and the regulators, who know best." We on the Liberal Democrat Benches do not think that they know best. History does not cause us to put much faith in the willingness of the Treasury, or of unaccountable regulators, to act. Nor does it give us any faith in their ability to determine the appropriateness, or otherwise, of action on such critical matters for our planet. We agree with the Chancellor that financial services have a key role to play in tackling climate change, but we believe that it is for Parliament to determine that role. Accordingly, we will bring amendments forward in Committee to ensure that the Bill does exactly that. They will do this, first, by requiring the Prudential Regulation Authority to have regard to climate-related financial risk when setting capital adequacy requirements and, secondly, by ensuring that credit-rating agencies have to take climate risk into account in setting credit ratings. Thirdly, they would bring forward the date when the recommendations of the task force on climate-related disclosure will be mandatory from 2025 to 2023 We will also seek amendments to ensure that, in setting general rules, the FCA has regard to the climate-related financial risks to which FCA investment firms are exposed and that the FCA, in setting Part 9C rules, and the PRA, in setting capital requirement regulation rules, have regard to the UK’s domestic and international climate obligations. I look forward to working on these issues with the noble Baroness, Lady Hayman, and other members of Peers for the Planet, the excellent organisation which she chairs I welcome the lead that the Government have taken in setting the net-zero target. I applaud the Treasury for moving on the TCFD recommendations, so far as they have gone, and for their positive words on green finance. However, the awful truth is that action in every respect of our response to the climate emergency is glacially and catastrophically slow. We are way off line to meet the Climate Change Act’s original 80% reduction target, let alone the revised net-zero one. There is a time when the talk of distant targets for which none of us will be held accountable has to end and the activity and action to meet them has to start. That time is now. The climate crisis is not something that might happen in some distant future if we do not get our act together. It is happening right now. Just ask those on the front line of the crisis; ask the people of the small island states who live with the prospect of being literally wiped off the map. Ask the farmers facing ever more erratic weather patterns and deteriorating soil conditions in Africa or South Asia. Ask householders in the UK who are becoming ever more susceptible to flood risk; ask the firefighters in California or New South Wales As we speak, the world is on course for three degrees of warming. The devastation that would cause is beyond contemplation. We know the threat that we face, and what we have to do to mitigate it, but that does not guarantee that we will do it. A global pandemic was number one on the Cabinet Office’s risk register. We knew it would happen one day, yet it seemed so far off that, when it suddenly arrived, we met it almost completely unprepared. We cannot afford to do the same with climate change. So I urge the Government to use this Bill to start, however modestly, to match their fine rhetoric with action and to ensure that the financial services industry is able to play its full part in combating climate change.