Treasury Committee launches inquiry into decarbonisation of the UK economy and green finance

On World Environment Day, the Treasury Committee is today launching a new inquiry into the decarbonisation of the UK economy and green finance

The Committee will scrutinise the role of HM Treasury, regulators and financial services firms in supporting the Government’s climate change commitments.

It will also examine the economic potential of decarbonisation for the UK economy in terms of job creation and growth. 

The three main strands of the inquiry are 1) The economic opportunity for the UK, 2) HM Treasury’s strategy, and 3) Green finance.

The Committee will start accepting written evidence on its website from today, until 26^th July. A scene-setting oral evidence session will take place on Tuesday 2 July, with witnesses confirmed nearer the time. Over the course of this inquiry, we will take evidence from financial services firms, think tanks, regulators and Government representatives.

Commenting on the launch of the inquiry, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, said:

“Climate change is one of the most pressing issues of our time. With recent protests and demonstrations, it has shot up the political agenda.

“Whilst decarbonising the UK economy presents significant challenges, it also provides an opportunity for the financial services sector to unlock its green potential.

“This inquiry will examine how HM Treasury and financial sector firms can support the UK to lead the way in green finance and environmental innovation.

“Decarbonising an economy doesn’t mean it has to stop growing. The time is ripe to explore how we can make sure that the UK gets this right.”

Simon Clarke MP, Member of the Treasury Committee, said:

“Since 1990, the UK has reduced its carbon emissions by more than 40 per cent, and our economy has grown by more than two thirds. But we need to do more.

“Both the public and private sectors have vital roles to play in transitioning to a decarbonised economy. The Committee on Climate Change has called on HM Treasury to review how the transition will be funded and where the costs will fall, especially if we are to deliver net zero carbon emissions by 2050.

“And the financial services sector, through various forms of green finance, can help the City become a global leader.”

--Ends--

Notes to Editors

• Mrs Morgan has today written to John Glen MP, Economic Secretary to the Treasury, for HM Treasury’s initial feedback on certain aspect of the inquiry. The letter is attached.

• The inquiry webpage, where evidence can be submitted, will be on the Treasury Committee website here. The full terms of reference for the inquiry are as follows:

Terms of Reference

This inquiry will cover:

• The economic opportunity that decarbonisation presents for the UK, and the potential of the green finance sector
• HMT’s strategy in facilitating clean growth and its response to the CCC’s net-zero recommendations
• The role of the Spending Review in facilitating net-zero
• The role that financial services firms are currently playing in financing the transition
• The ‘green’ financial product landscape, and their associated regulatory environment

Some of the key questions the Committee will consider in this inquiry include:

The economic opportunity:

1. What economic costs and benefits does decarbonisation present for the UK?
2. What benefits can a growth of the Green Finance sector deliver for the UK, and does the UK hold a competitive advantage in this space?
3. How might HMT deliver a regionally balanced and ‘just’ transition across the UK? 

HMT’s strategy:

1. What is HMT’s current strategy, and approach to, UK decarbonisation, and is it fit for purpose?
2. How does HMT work with the Clean Growth Strategy and government departments to support decarbonisation? Is this working well?
3. How should HMT’s approach evolve to ensure the Government meets the legally binding carbon budgets (and the net-zero targets, if applicable)
4. What role should the 2019 Comprehensive Spending Review play in UK decarbonisation? What projects or measures should receive additional funds through this process?

Green Finance: 

1. What role do UK financial services firms currently play in the decarbonisation of the economy, (for example, through stewardship, capital allocation to green projects, green financial products)? What more can they do?
2. What steps have UK banks, asset managers, and pension funds taken to ‘green’ their business models, investments strategies and balance sheets, taking in to account climate and transition risks?
3. Are there any barriers (regulatory or otherwise) preventing financial services firms from delivering green finance or investing in ‘green’ assets?
4. What prudential risks does climate change pose? 
5. What is the Financial Conduct Authority and the Prudential Regulation Authority doing to support decarbonisation and a ‘greening’ of the financial system?

(b) What expectations do (and should) they place on regulated firms about their role in the transition through their policy and supervisory activities?

1. What is the consumer demand for ‘green’ financial products?
2. Are there a range of accessible options available to consumers seeking to source ‘green’ financial products across the product suite (for example, mortgages, bonds, investment products, savings accounts, loans)? Do certain instruments dominate the green finance landscape, and if so, why? 
3. Do accompanying documents for ‘green’ instruments (bonds, funds, etc) articulate why and how the composite holdings within that instrument are ‘green’? Are obligations placed upon listed companies, to report their carbon emissions, to inform fund composition?
4. Does the current advice and KYC process effectively facilitate a consideration of sustainability preferences?