HM Treasury is driving progress with the proposal for reform and to implement a climate-focused regulatory principle for the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), in reference to the achievement of the UK’s net zero by 2050 target. However, for the City of London to remain attractive as a business hub, it is important that HMT elevates tackling climate change to a statutory objective, which includes reference to interim targets between now and 2050.
E3G provided feedback on the HM Treasury’s proposals for reform to the Financial Services Future Regulatory Framework Review. As they stand, HM Treasury’s proposal to include an “international competitiveness” statutory objective poses considerable risks to the stability of the UK market. Therefore, we encourage HM Treasury and the regulators to articulate a new definition of “competitiveness” for the UK. This definition should be pinned on the delivery of the UK’s ambition to be the first “Net Zero Aligned Financial Centre” as announced by the Chancellor of the Exchequer Rishi Sunak at COP26.
In our response to the HM Treasury’s proposals for reform, E3G proposes the following four recommendations:
- The proposal to add new growth and international secondary objectives for the PRA and the FCA could severely threaten progress for the delivery of the UK’s Net zero by 2050 commitment. We recommend that climate change and a net zero economy have equal or greater weighting than “competitiveness.”
- The creation of a financial services joint committee to oversee and scrutinise new financial regulations and policy. The committee should be transparent and balanced and representatives with close ties to the finance industry should not dominate.
- Emphasis of climate change on regulatory action should be bolstered and elevated from a regulatory principle to a statutory objective level.
- The UK should seize the opportunity for international leadership and market competitiveness by being a first mover on climate and greening the financial system.
E3G submitted a response to the Discussion Paper on 9 February. Read our response to the proposals for reform here.