A group of top finance firms including Hargreaves Lansdown and Aviva Investors have called on financial watchdogs make net-zero a central objective if the UK is to avert the worst economic damage of climate change.
In a submission to MPs as the landmark Financial Services and Markets Bill passes through parliament, bosses at the two firms as well as those of Phoenix, Tide, Aegon, PensionBee and a host of others, said the bill offered a “once in a generation opportunity” to formalise the role of regulators in the net zero transition.
“Leaning into the transition without delay also helps address the significant economic and financial damage, and risks to market stability, posed by climate change and nature loss,” the firms wrote.
“Such risks far offset short term gains in international trade competitiveness, and we fully support the growth of a credible green finance sector in the UK to lean into the global economic transition.”
The Financial Services and Markets Bill is set to boost the powers of regulators in the UK in a bid to achieve a ‘Big Bang 2.0’ in UK financial services. Among the changes in the bill is the inclusion of a new principle for regulators that states they need to contribute to compliance with the UK net zero emissions target.
But the firms have claimed the measure does not go far enough and it should be promoted to a full statutory objective for regulators.
“A statutory objective would empower regulators to pioneer the leading-edge regulations needed to press the private sector to support the net zero transition,” the firms said.
“The regulators could tackle the rising prevalence of greenwashing, review and/or ensure the credibility of transition plans, provide guidance on adaptation finance, take steps to avoid substantial disruption to businesses and financial losses through ecosystem destruction, and go further in tackling the build-up of systemic market stability risks.”
Inclusion of net-zero as a statutory objective would be another major shake-up of regulators’ remit after the Financial Conduct Authority and Prudential Regulation Authority recently backed calls for regulators to include growth and competitiveness as secondary objectives.
The FCA has been looking to clampdown and force more robust action and disclosures from firms on climate and emissions in the past year, having rolled out mandatory climate reporting for bigger listed firms and asset managers from the start of this year.
This week the watchdog announced plans to stamp out ‘greenwashing’ with a raft of measures including restrictions on the use of terms like ‘green’ and ‘sustainable.
The FCA has been contacted for comment.