The UK must become the world leader in green finance
The new finance bill can make the UK attractive to green finance and help protect forests too argues Rt Hon. the Lord Randall of Uxbridge.
When I suggested a ‘Stern Report on nature’, the resulting Dasgupta Review found our demands on nature far exceed its capacity to supply them, putting biodiversity under huge pressure and society at ‘extreme risk.’ The stock of natural capital per person declined by nearly 40% between 1992 and 2014, a period when produced capital per person doubled.
So, I was delighted when in December, the Montreal Conference on Biodiversity (COP15) set a global goal for nature – to protect 30% of land and sea by 2030. This protection is vital and urgent – WWF’s Living Planet Report found that wildlife populations declined by 69% since 1970.
One of the thorny issues at COP15 was finance. After walkouts from some delegations, the conference agreed on a target of $200bn for conservation initiatives from public and private sources.
I am proud that our government fully supports this financial pledge and is committed to play its part in meeting it. But to do this, we must align mainstream finance with its goals – which brings me to the Financial Services and Markets Bill which is currently passing through Parliament.
The Bill sets out how the financial sector will be regulated over the next decades. The bill must align with our international commitments to nature and climate.
There is fierce competition by the world’s leading financial centres to attract green investment. ESG investing is the fastest-growing segment of the finance sector, and the sustainable finance market grew to reach $1.6trn globally in 2021.
For the UK to become the global centre for green finance, we need to show we have a well-regulated market that can protect investors from greenwashing and support companies leaning into the green transition.
This Bill sets out whether the UK’s financial regulators will have the teeth to, for example, tackle greenwashing or not and, as it stands, the Bill will jeopardise the UK’s reputation as a supportive market for green finance.
This is why regulators need a statutory objective on climate change and nature. Failure to do so will give our international competitors an open goal. And without amendment, the Bill will not future-proof our financial sector to fund the transition to a net zero, nature-positive economy.
Unlocking private finance to tackle the nature and climate crises is a huge opportunity for UK businesses. The private sector knows this, which is why a dozen financial institutions have already written to the Bill Committee expressing their support in amending the current Bill to make the UK the world’s leading green finance centre it needs to be in the coming decades.
The finance sector contributes more than £193bn (including £75bn in tax) to the economy and employs 2.3 million people across the UK. If we change how we regulate it, it is vital that we get it right.
Getting the Bill right will be key to the Government achieving its ambition for the UK to become the world’s first net-zero-aligned financial centre and to protect and restore nature. It will help unlock the finance needed to protect forests, invest in renewable energy, insulate homes and drive climate and nature-positive growth across the UK and the UK economy.
This Bill is a key plank in setting the architecture for financial regulation for at least a generation, yet it does not address how we tackle the twin crises of nature loss and climate change and does not do enough to deliver on the government’s promises on nature or net zero.
That is why I will be supporting a new objective for the UK’s financial regulators on climate and nature.
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