Climate issues left behind in Financial Services Bill

“Those profits, going to the few, must not be at the expense of the living future of us all.” Green Peer Natalie Bennett outlines why it is essential that the Financial Services Bill centres on the climate emergency. 

Houses of Parliament
Natalie Bennett

The Pensions Scheme Act, passed last year, was the first financial legislation in British history to contain a reference to climate change. That was a concession won by the House of Lords from the Government after a long wrangle.

Yet this week, as we debated the major, EU-regulation-replacing Financial Services Bill, we had before us a much larger piece of legislation – at a time when the term “green finance” spills regularly from government ministers’ and officials’ lips, together with references to alleged “world leadership” as the chair of COP26 – with again no mention of the climate emergency or the nature crisis. 

This, as the astonishing news emerged that local government pension funds still hold £10 billion in fossil fuel investments, despite large numbers of them having declared climate emergencies. But perhaps we can’t blame local government for the oversight when our current Government neglects to include the issue in legislation, continues to put money into new fossil fuel assets, and to subsidise the operation of existing ones to the tune of billions.

The level of concern from some parts of the Government, and even the Treasury, is evident, given its commissioning of the just-released Dasgupta Review, which identifies nature as ‘our most precious asset’. It says that we need vastly more protection for our scant remaining natural world – on this, one of the planet’s most nature-depleted lands

That surely means making sure that money is not going into destructive actions for climate or nature – something that should be of concern to the Financial Conduct Authority (FCA). And that we must begin to implement large-scale and widespread investments that address the climate emergency and biodiversity loss – again a matter for the FCA.

Yet what we heard from the government in the debate was, as our crossbench environment champion Baroness Hayman put it, a St Augustine-style view “being happy to be made green, ‘but not yet’.” We were promised that – sometime – ‘remit letters’ would be sent to the FCA and the Prudential Regulation Authority, something that, unlike regulation, there would be no direct parliamentary oversight of.

I challenged Earl Howe on a statement: “There is no evidence that ‘greener’ means ‘prudentially safer’”, pointing to the work of the Carbon Tracker Initiative. His response was: “There is no international agreement on what the term ‘green’ means. Therefore, we cannot say with certainty that ‘greener’ means ‘prudentially safer’.” We appeared to be again in theological territory, this time counting angels dancing on the head of a pin.

The debate came just after the release of the United Nations Environment Programme report Making Peace with Nature. "Our war on nature has left the planet broken," UN Secretary-General Antonio Guterres says in its introduction. The often piecemeal response to the climate crisis, biodiversity loss and pollution is "not going to get us to where we want", according to Inger Andersen, Executive Director of UNEP.

Even including climate and nature in the highest level of priorities of financial oversight is clearly not enough. We need a systems thinking, complete view of how we stop treating the planet as a mine and a dumping ground, and treasure its immensely complex systems of life of which we still have little understanding. But of course we also have to consider the billions of people – millions in the UK alone – whose basic needs are not being met while we trash our planet, using as a species the resources of 1.6 planets every year, in the UK using our share of three planets.

With the budget approaching, I was with the All-Party Parliamentary Group on Limits to Growth this week hearing about New Zealand’s modern, fit for the 21st century, Living Standards Framework – something on which there’s been wide public as well as expert consultation – that provides a guide for all government spending, for Treasury decision making. That’s truly world-leading, and I very much hope that the Treasury is looking as a matter of urgency to develop a similar system. But in the meantime, at least the inclusion of the climate emergency and nature crisis in this bill, understanding that our financial sector is 100 per cent dependent on the natural world, would be progress. To adapt a phrase, there’s no finance on a dead planet.

And if you listen to Prime Minister Boris Johnson, it would surely seem to be inevitable. “Obviously it's right to focus on climate change, obviously it's right to cut CO2 emissions but we won't achieve a real balance with our planet, unless we protect nature as well”, Mr Johnson said on 11 January as he announced £3 billion of UK climate finance to be spent on supporting nature.

Allowing money to be pumped into systems that are wrecking the natural world on which our economy is entirely dependent is – to put it extremely mildly – not a good idea, and something that should be considered in every action, every regulation, of every government body, but particularly the FCA, given the extreme financialisation of our economy that means almost every element of its is now regarded as a potential profit source. Those profits, going to the few, must not be at the expense of the living future of us all.