The new PM must act fast to amend the Financial Services and Markets Bill so that it drives positive outcomes for the climate and nature, writes WWF’s Karen Ellis
Last month, the High Court held the UK government’s net-zero strategy to be wrong, ordering it to produce an updated climate strategy showing how it will meet its own climate targets.
This coincided with a new record temperature in the UK of over 40C which led to the London Fire Brigade having their busiest day since the Second World War.
Whilst other countries like India and Pakistan suffered from temperatures of 50C back in May, the latest heatwave in the UK has forced many to recognise that things cannot go on as they are.
Yet, with a new Prime Minister on the horizon, the leadership that the UK Government promised at the COP26 climate talks in Glasgow last year seems to be melting away in the heatwave.
It has never been clearer that the next Prime Minister must embed climate objectives across the government’s economic and financial policies and pick a team that will tackle climate change head on.
Chancellor Nadhim Zahawi’s maiden Mansion House speech was an opportunity for the Government to set out how it will keep its promise to ‘make the UK the world’s first net zero aligned financial center’ and demonstrate that it has robust plans in place to meet its climate goals .
But instead, it served to quietly dampen hopes for progress on the government’s climate ambitions, with only one mention made of net zero.
With green finance one of the fastest growing sectors in global finance, the UK government missed an opportunity to attract new business and keep our financial sector at the forefront of this agenda internationally.
At the COP26 Climate Summit last year, the government showed great ambition on tackling climate change, recognising that the financial sector has a transformational role to play. In addition to its commitment to become the world’s first net zero-aligned financial centre, the government also announced in Glasgow that it would mandate large companies to publish their net-zero transition plans and climate reporting standards.
But since then, it is not clear that the government is willing to put in place the clear policy and regulatory direction necessary to deliver on those commitments, and instead has missed numerous opportunities to embed its climate promises centrally into relevant policies.
The most worrying announcement last week was on the publication of the Financial Services and Markets Bill. It is the legislation that will implement the ‘Future Regulatory Framework’ and fundamentally restructure how financial services are regulated for at least a generation.
Introduced to Parliament last Wednesday, the Bill delivers on many proposals set out in previous government consultations – but fails to deliver anything meaningful on climate and nature action.
The Bill effective passes many roles from ministers to the regulators and, as it stands, will give regulators a objective statutory on competitiveness and growth, but subordinate action on net zero to a ‘regulatory principle’, alongside seven others.
If the government is serious about climate action, then the new bill must include a net-zero statutory objective, which the regulators would be required ‘to advance’ – rather than a regulatory principle, that they would only be required to ‘take into account’ ‘.
This sounds technical, and it is – but it is vitally important. In the current bill, tackling climate change is not a first-order priority for regulators.
Without a statutory obligations to tackle climate change, regulators will be largely toothless, greenwash will prevail, and we won’t see the promised transition of the financial services sector.
On the other hand, with tackling climate change embedded into the framework of our financial regulation, this bill could be the foundation stone of the first net-zero finance center and steal a march on the rest of the world in attracting green finance – with all the many benefits that will bring.
So, can the UK still become the world’s first net zero finance centre? Yes, but only if it amends the Financial Services and Markets Bill which is due to be debated on 7 September.
The next Prime Minister must show leadership on the biggest issue that affects us all. The government can’t keep firefighting climate change in such a piecemeal fashion. Otherwise, the fire will soon be too big to tackle.
Karen Ellis is chief economist at WWF