Asked by
To ask Her Majesty’s Government what assessment they have made of
the level of demand for investments that are advertised as
meeting Environmental, Social, and Governance (ESG) criteria; and
what steps they are taking, if any, to ensure that such
investments are in line with (1) the United Nation’s Sustainable
Development Goals, and (2) the Paris Agreement on climate
change.
(Con)
My Lords, demand for sustainable finance is growing rapidly. Some
49% of UK-managed assets now integrate ESG factors, and there is
strong demand from consumers and investors for such assets. The
Government are committed to ensuring that this growing market is
well regulated and that the UK is the best place in the world for
sustainable finance. That is why the Government have taken
world-leading action to green our financial system, safeguard
consumer interests and prevent greenwashing.
(GP)
I thank the noble Baroness for her Answer. I know that she is
aware of the recent article in the Financial Times, entitled
“ESG: the next mis-selling scandal?” This suggested that there
were strongly misleading claims being put on financial products
labelled as green, sustainable, ESG, et cetera. Does the Minister
agree that no product should be so labelled if it is not
compliant with the Paris and, indeed, Glasgow climate agreements,
international biodiversity treaties and the sustainable
development goals? Given that report and many others, do the
Government not need to act urgently to ensure that there is
adequate regulation or legislation to make sure that people are
actually getting what they believe they are putting their money
into?
(Con)
The noble Baroness is absolutely right. That is why the UK is
developing an economy-wide regime for ESG disclosure, focusing in
the first instance on those requirements related to climate
change. Alongside that, the FCA is creating a consumer-facing
label, so that consumers seeking to invest in ESG products know
what they are investing in and that it meets the high standards
that they would expect.
(LD)
My Lords, is the Minister aware of the comments made yesterday by
the chair of the US Securities and Exchange Commission? He said
of the ESG funds:
“When I think about these questions, I’m reminded of walking down
the aisle of a grocery store and seeing a product like fat-free
milk … in that case you can see objectives figures like grams of
fat … Investors should be able to drill down and see the
ingredients underlying these funds.”
What activity is the FCA taking to ensure that such detail is
provided? Is there co-ordination with the Securities and Exchange
Commission in the United States?
(Con)
On the point about co-operation with the United States, I will
have to check and write to the noble Lord. On the FCA, in
addition to developing this consumer-facing label so that people
can, with transparency, understand what they are investing in, it
is also looking at the question of regulating the firms and
providers that look at ESG ratings and providing that information
also.
(Con)
My Lords, I commend the Government on their commitment to green
finance and on encouraging sustainable investing. Following on
from the previous Question by the noble Lord, , will the Minister tell us what
assessment the Government have made of the impact in terms of
climate change of the so-called mining of cryptocurrencies like
bitcoin, which, in itself, seems to have caused more greenhouse
gas emissions per annum than many countries over the last year or
two? Are the Government concerned about the sustainability of
crypto from that perspective?
(Con)
The noble Baroness is absolutely right. We are aware of the huge
energy use that can be involved in these currencies. The UK is
developing a green taxonomy, which will make us the first country
in the world to make disclosures aligned with our Paris and other
commitments mandatory economy-wide, including the
financial-services sector. That will bring transparency over the
climate impacts of firms’ activities and allow the market and
consumers to respond accordingly.
(Lab)
My Lords, in recent days, we have seen a variety of organisations
announce their intention to divest from investments in, or
associated with, Russia. This is a welcome response to Vladimir
Putin’s ongoing and flagrant breaches of international law in
Ukraine. While it is not for government to dictate how private
organisations invest their money going forward, what steps are
Ministers taking to promote investment opportunities that are
greener, socially responsible and likely to be of long-term
economic benefit to the UK, as well as our friends and
neighbours?
(Con)
The work that we are doing to green finance and green our economy
means that there will be far greater transparency on the impact
of firms on climate change and the wider environment. This will
allow firms to make those kinds of decisions. The noble Lord
talked about divestment. In terms of our approach or view on that
with regard to climate activities, we expect investors to use SDR
disclosures to integrate climate into stewardship activities.
That may eventually lead to divestment, but beforehand, they may
use their position as investors in major companies to encourage
them to greener positions before considering divestment
altogether.
of Headley (Con)
My Lords, I declare my interest as an adviser to Banco Santander
and apologise because I probably should have mentioned that when
I spoke on the previous Question. Can my noble friend clarify, in
the Government’s approach to the green taxonomy and ESG, how
nuclear and certain types of gas power stations will be
classified? Will they be classified as green and
environmental?
(Con)
My Lords, the Government set up a specific panel to look at those
very questions, and I cannot pre-empt the outcome of its
work.
(CB)
My Lords, I declare my interests as set out in the register. I
understand that the noble Baroness cannot prejudge what the panel
will say on the green taxonomy. However, does she agree that it
is essential, if that taxonomy is to be useful both in this
country and internationally, that it is both science- based and
free of vested interests?
(Con)
Yes, I agree with the noble Baroness on that point. I think the
approach that the UK has taken to date to this whole area meets
that test and will continue to do so.
(LD)
The director of the think tank InfluenceMap said about the same
FT article to which the noble Baroness, Lady Bennett, referred,
that if you label something that invests in fossil fuels
“sustainable”, and there is a whole body of scientific opinion
that new gas, oil and coal production is incompatible with
net-zero targets, there is probably quite a good chance that the
fund is being mis-sold in some way. Does the Minister agree that
a legal definition of greenwashing is urgently needed to prevent
mis-selling of financial products?
(Con)
My Lords, I do not think we will be taking quite that approach to
a legal definition of greenwashing. We will, through the green
taxonomy, provide a clear way by which firms are transparent and
what counts towards their sustainability claims, accompanied by
regulation from the FCA on the consumer-facing label, but we will
also look at whether firms that provide ESG data and ratings
should be included in regulation.
(Con)
The noble Baroness who asked the Question referred to the case
for fresh legislation in this area. Do the Government believe
that further legislation is required; and, if so, when will it be
introduced?
(Con)
My Lords, I believe much can be done under existing powers in FCA
regulation and the UK’s green taxonomy, but if any legislation is
needed, it will be put forward in the usual way.
(LD)
My Lords, many investors are saying that with the EU, the UK, the
US and other countries choosing different definitions for their
green taxonomy, it is becoming almost impossible to work around
and through this confusing, complex system. What are the
Government, together with other centres, doing to try to come to
a single, clear definition that the world can rely on?
(Con)
My Lords, the noble Baroness makes a good point. The UK is
working with the International Sustainability Standards Board to
develop global sustainability reporting standards. We are also
signed up to an initiative that combines the UK and China to
create a globally recognised approach to the green taxonomy that
will be common across different jurisdictions.
