The financial sector and the UK’s net zero transition
Environmental Audit Committee
Closed
Inquiry
The EAC is examining the role of financial institutions, including UK signatories to the Glasgow Financial Alliance for Net Zero, in winding down the financing of fossil fuel extraction and promoting the transition to green energy in pursuit of the Government’s climate and environment targets. Read the call for evidence …
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22
Recommendations
10
Conclusions
1
Report
4
Oral sessions
8
Letters
4
Events
Activity timeline 18 events
23 May
2024
2024
23 Feb
2024
2024
23 Feb
2024
2024
29 Nov
2023
2023
Report published
20 Jun
2023
2023
19 Jun
2023
2023
18 May
2023
2023
Oral evidence
18 May
2023
2023
Formal meeting (oral evidence session) · Room 16, Palace of Westminster
30 Mar
2023
2023
30 Mar
2023
2023
8 Mar
2023
2023
Oral evidence
8 Mar
2023
2023
Formal meeting (oral evidence session) · Room 15, Palace of Westminster
Oral evidence sessions 4 sessions
18 May 2023
View on parliament.uk
panel one
Amy Jenkins · Department for Energy Security and Net Zero
Fayyaz Muneer · HM Treasury
The Baroness Penn · HM Treasury
The Lord Callanan · Department for Energy Security and Net Zero
Zoe Norgate · Department for Energy Security and Net Zero
8 Mar 2023
View on parliament.uk
panel one
Michael Marks · Legal and General Investment Management
Roslyn Stein · AXA
Steve Waygood · Aviva Investors
Tim Lord · HSBC UK
14 Dec 2022
View on parliament.uk
panel one
Dr Anastasiya Ostrovnaya · Imperial College Business School
Mark Campanale · Carbon Tracker Initiative
Ryan Jude · Green Finance Institute
Sam Alvis · Green Alliance
Reports 1 report · click to expand
| Title | HC No. | Published | Items | Response |
|---|---|---|---|---|
| First Report - The financial sector and the UK's net zero transi… | HC 277 | 29 Nov 2023 | 32 | Responded |
Recommendations & Conclusions
32 results
1
Conclusion
Not Addressed
First Report - The financial secto…
Vast numbers of fossil fuel assets risk becoming stranded due to energy transition
We have heard that vast numbers of fossil fuel assets are at risk of devaluing before they are extracted due to changes in energy consumption and therefore becoming ‘stranded assets’. This is a particular risk in the City of London, …
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Government Response
The government reiterates its stance on the importance of domestic oil and gas for energy security and describes OPRED's existing role in regulating decommissioning liabilities, without directly addressing the committee's conclusion on the specific risks of stranded assets in the City of London or the lack of consensus on who bears the cost.
2
Recommendation
Acknowledged
First Report - The financial secto…
Require the North Sea Transition Authority to calculate decommissioning cost impacts for new licences.
We recommend that to mitigate against the risk of stranded assets from North Sea extraction, the North Sea Transition Authority should calculate what the impact to the UK taxpayer and company profitability would be of requiring the cost of decommissioning …
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Government Response
The government highlights the importance of domestic oil and gas and existing decommissioning regulations, stating that OPRED reviews the risk of stranded assets. OPRED offers to engage further with the Committee to understand their policy suggestion regarding calculating the impact of new duties on operators for decommissioning costs, without committing to the calculation itself.
3
Conclusion
Accepted
First Report - The financial secto…
Private banks continue substantial fossil fuel financing despite Paris Agreement pledges.
We have heard during our inquiry that despite the pledges set out and agreed upon by global governments in the Paris Agreement, private banks have financed trillions of US dollars into fossil fuels. New UK fossil fuel Initial Public Offerings …
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Government Response
The government reiterates its commitment to net zero and energy security, stating its mission to replace fossil fuels with renewables and nuclear energy. It highlights its strong track record in attracting green investment, citing specific programmes, funding, and action plans aimed at accelerating the clean energy transition.
4
Conclusion
Rejected
First Report - The financial secto…
Ensure government clarifies energy transition market signals to boost investment.
We absolutely agree with the Minister for Energy Efficiency and Green Finance that energy security and net zero are two sides of the same coin. However, we are concerned that many believe that the Government is sending mixed signals to …
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Government Response
The government rejects the premise of sending mixed signals, strongly affirming its commitment to achieving net zero and energy security by replacing fossil fuels with renewables and nuclear. It details significant public and private investments, funding programmes, and action plans already in place to accelerate the clean energy transition and support green industries.
5
Conclusion
Rejected
First Report - The financial secto…
No consensus on fossil fuel transition speed risks climate goals and stranded assets.
We have previously concluded in our report ‘Accelerating the transition from fossil fuels and securing energy supplies’ that there is not a consensus on the speed of transition from fossil fuels as the Government endeavours to reach net zero by …
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Government Response
The government rejects the committee's concern regarding the balance of North Sea assets and renewables, asserting that the domestic oil and gas industry remains vital for energy security. It states that new licensing, supported by existing and new legislation, ensures a managed decline of oil and gas production compatible with net zero targets.
6
Recommendation
Accepted
First Report - The financial secto…
Publish quarterly reports on UK energy independence, net zero progress, and scope three emissions.
We recommend that the Government publish quarterly reports to show how the UK is moving towards greater energy independence while staying on track to meet its net zero target, including an assessment of the effect of scope three emissions on …
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Government Response
The government does not commit to publishing new quarterly reports, stating it already provides extensive detail on net zero and energy security progress through various annual and biennial reporting mechanisms, including updates on climate targets and net carbon accounts.
7
Recommendation
Rejected
First Report - The financial secto…
Set a clear date for ending new North Sea oil and gas licensing rounds.
We reiterate the recommendation of our earlier report that the Government set a clear date for ending new oil and gas licensing rounds in the North Sea: this date should fall well before 2050. (Paragraph 57) Plans for transition: reporting …
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Government Response
The government rejects setting an end date for new oil and gas licensing rounds, arguing that the domestic industry is vital for energy security and the Offshore Petroleum Licensing Bill will ensure regular annual licensing.
8
Recommendation
Deferred
First Report - The financial secto…
Current 'comply or explain' transition plan disclosure rules are insufficient.
We welcome the Government’s intention to consult on requiring companies to disclose transition plans. However, the current “comply or explain” basis should be for an interim period only: a company can disclose by simply not having a transition plan, defeating …
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Government Response
The government is supporting the Transition Plan Taskforce (TPT) and will hold an upcoming consultation to consider the UK's approach to transition plans and the role of the TPT's Disclosure Framework, without committing to ending 'comply or explain'.
9
Recommendation
Deferred
First Report - The financial secto…
Deferring mandatory transition planning risks UK's green finance leadership position.
We agree with the Government that the operating environment will become increasingly difficult for those firms that do not set out their plans for contributing to net zero. However, we do not think it is enough to leave the issue …
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Government Response
The government established the Transition Plan Taskforce (TPT) to create a gold standard for private sector climate transition plans and will hold an upcoming consultation to consider the UK’s approach, including the TPT’s Disclosure Framework.
10
Recommendation
Deferred
First Report - The financial secto…
Mandate companies to develop and disclose transition plans in government consultation.
The Government’s consultation on requiring companies to disclose transition plans should include consideration of making it compulsory to have and to disclose a transition plan—not just if a company happens to have one—and the most suitable timetable for doing so. …
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Government Response
The government details existing work by the Transition Plan Taskforce and the FCA on transition plan disclosures. They state an upcoming consultation will consider the UK’s approach to transition plans, including the TPT Disclosure Framework and endorsement of ISSB standards, which will inform future policy but does not explicitly commit to making it compulsory to *have* a plan or mandatory reporting as the ultimate aim.
11
Recommendation
Deferred
First Report - The financial secto…
Introduce regulations ensuring companies follow Transition Plan Taskforce guidance for disclosures.
We welcome the publication of the Transition Plan Taskforce’s disclosure framework for transition plans, and the steps taken to achieve international alignment of that framework. We believe that those who publish transition plans should follow a compulsory framework, to ensure …
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Government Response
The government established the Transition Plan Taskforce (TPT) and will hold an upcoming consultation to consider the UK’s approach to transition plans and the role of the TPT’s Disclosure Framework, without committing to introducing regulations for compliance.
12
Recommendation
Deferred
First Report - The financial secto…
Set out consistent regulatory expectations and establish independent monitoring for organisations' net zero transition plans.
A plan is only effective if it delivers its contents. The Government should set out simple, consistent regulatory expectations for net zero transition plans and establish an independent mechanism for monitoring and evaluating and verifying organisations’ net zero transition plans, …
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Government Response
The government established the Transition Plan Taskforce (TPT) and will hold an upcoming consultation to consider the UK’s approach to transition plans and the role of the TPT’s Disclosure Framework, without committing to specific regulatory expectations or an independent monitoring mechanism.
13
Conclusion
Acknowledged
First Report - The financial secto…
Just transition principles not explicitly included within the transition plan framework.
We welcome the Government’s commitment to just transition principles in its Green Finance Strategy and the inclusion of specific workstreams in the creation of the transition plan disclosure framework and implementation guidance. While the Transition Plan Taskforce acknowledges the inclusion …
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Government Response
The government acknowledges the concern, stating the Transition Plan Taskforce (TPT) has launched working groups, including one on just transition, to advise on appropriate integration of these topics into its outputs.
14
Recommendation
Not Addressed
First Report - The financial secto…
Publish further guidance for stakeholders on integrating just transition principles into the transition plan framework.
We recommend that the Government publish further guidance to stakeholders to advise explicitly how just transition principles should be considered within the transition plan framework, to ensure that companies are able to provide better outcomes for all people, including workers …
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Government Response
The government notes the Transition Plan Taskforce (TPT) has a Just Transition Working Group to advise on integrating these principles into TPT outputs but does not commit to publishing its own further guidance for stakeholders as recommended.
15
Recommendation
Not Addressed
First Report - The financial secto…
Incorporate company contributions towards halting nature loss within the transition plan framework's strategic ambition.
We welcome the references to nature in the Transition Plan Taskforce’s framework; however, we consider that the framework could go further on nature. We recommend that the Government should take steps to incorporate into the framework the contribution by a …
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Government Response
The government states the Transition Plan Taskforce (TPT) has launched a Nature Working Group to advise on appropriate integration of nature-related topics into TPT outputs, but does not commit to taking specific steps to incorporate nature loss into the transition plan framework.
16
Conclusion
Acknowledged
First Report - The financial secto…
Government intentions for Sustainability Disclosure Requirements and mandatory international standards are welcomed.
We welcome the Government’s intentions for Sustainability Disclosure Requirements (SDR). As part of that framework, we welcome the Government’s intention to incorporate International Sustainability Standards Board (ISSB) standards and make them mandatory, its consultation on reporting scope 3 greenhouse gas …
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Government Response
The government reaffirms its commitment to implementing Sustainability Disclosure Requirements (SDR) and highlights its support for the Taskforce on Nature-related Financial Disclosures (TNFD), stating it will consider how best to incorporate TNFD recommendations into UK policy.
17
Recommendation
Deferred
First Report - The financial secto…
Set out an SDR implementation timetable, commit to mandatory TNFD reporting, and phase in disclosures.
To maintain the UK’s global leadership in green finance reporting, the Government must keep up the momentum. We recommend that Ministers set out an overarching implementation timetable for the SDR, including for TNFD reporting, and commit to making TNFD reporting …
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Government Response
The government reiterates its commitment to Sustainability Disclosure Requirements (SDR) and confirms it will consider how best to incorporate the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations into UK policy, deferring a commitment to a specific timetable or mandatory TNFD reporting.
18
Conclusion
Acknowledged
First Report - The financial secto…
Delays to the introduction of the UK green taxonomy are concerning.
While we welcome the Government’s intention to introduce a UK green taxonomy, we are concerned to note the delays to its introduction. As with transition plan frameworks and disclosures, we support the principle of a mandatory taxonomy to ensure comparability. …
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Government Response
The government acknowledges the committee's concerns about delays and confirms it is working at pace to publish a consultation on the Green Taxonomy shortly. It plans a testing period of voluntary disclosures for at least two reporting years before considering mandatory obligations, citing complexity and a need for usability.
19
Recommendation
Deferred
First Report - The financial secto…
Introduce UK green taxonomy with spectrum of definitions, monitor progress, and ensure mandatory status.
We recommend that the Government seek to introduce the UK green taxonomy as soon as possible. That taxonomy should include a spectrum of definitions—‘fifty shades of green’, as one of our witnesses put it. During the period of voluntary reporting …
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Government Response
The government commits to publishing a consultation on the UK Green Taxonomy shortly and will implement a voluntary disclosure period for at least two reporting years before considering mandatory obligations. It does not explicitly address the recommendation for a "spectrum of definitions" or quarterly progress reporting, nor does it commit to mandatory status within two years of the voluntary period.
20
Recommendation
Deferred
First Report - The financial secto…
Heed calls for a long-term institutional home for the UK green taxonomy.
It is unfortunate that, due to the delays to the introduction of the green taxonomy, the remit of the Green Technical Advisory Group expired before the testing period of voluntary disclosures could begin. We urge Ministers to heed the group’s …
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Government Response
The government acknowledges the Green Taxonomy Advisory Group's advice and states it will consider what external advice is required going forward, following a forthcoming consultation. It does not commit to establishing a long-term institutional home for the UK green taxonomy as urged by the committee.
21
Conclusion
Accepted
First Report - The financial secto…
Progress in developing blended finance models for net zero projects is welcomed.
We welcome the Government’s progress in developing blended finance models for net zero projects, in particular the work of the UK Infrastructure Bank (UKIB) which, according to the evidence given to us by the Minister, has created around £4 of …
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Government Response
The government highlights the recently announced Net Zero Blended Finance Project (November 2023), which aims to improve government capacity and explore innovative blended finance approaches to mobilise private sector investment for net zero technologies, working with the UK Infrastructure Bank.
22
Recommendation
Deferred
First Report - The financial secto…
Publish a single document detailing all blended finance models for net zero and nature
The Government must keep to its ambition of setting out its future plans for net zero blended finance solutions by the next spending review, and should include nature recovery projects within this suite of solutions. The Government should set out …
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Government Response
The government announced the Net Zero Blended Finance Project in November 2023, which aims to improve its capacity to explore innovative blended finance approaches and mobilise private investment for net zero technologies. However, the response does not explicitly commit to setting out future plans by the next spending review, including nature recovery projects, or consolidating all models into one document for cross-checking.
23
Recommendation
Accepted
First Report - The financial secto…
Publish the next round of net zero sector investment roadmaps without delay
We welcome the many net zero sector roadmaps that the Government has published and plans to publish, which should provide investors with the detail they require to help their investments align with the Government’s net zero target. We particularly welcome …
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Government Response
The government confirms the publication of several net zero investment roadmaps, including civil nuclear in January 2024 and the Advanced Manufacturing Plan in November, and commits to publishing a hydrogen investor roadmap update in February 2024 and a nature roadmap by the end of 2024.
24
Conclusion
Accepted
First Report - The financial secto…
Government exploring methodologies for tracking net zero and nature financial flows
Understanding levels of investment across the economy is vital for knowing whether the UK is on track to meet its climate and nature targets. That is why we welcome the work underway by the Government to explore methodologies for tracking …
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Government Response
The government recognises the importance of tracking investment flows and details ongoing efforts, including the concluded scoping phase of the UK Landscape of Climate Finance (LCF) research and research into tracking private finance for nature's recovery. It states it will begin gathering data this year against targets for nature finance.
25
Recommendation
Deferred
First Report - The financial secto…
Establish formal mechanism by end of Parliament to track net zero and nature financial flows
We recommend that the Government go further and turn this research into a formal tracking mechanism by a date no later than the end of the current Parliament. The Government should task either an existing independent body, or create a …
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Government Response
The government acknowledges the need for tracking investment flows and states that the scoping phase for a UK Landscape of Climate Finance (LCF) model has concluded. It is now considering next steps, including the potential role of an independent body, and will begin gathering data on private finance for nature's recovery this year, but does not commit to a formal tracking mechanism by the end of the current Parliament.
26
Recommendation
Accepted
First Report - The financial secto…
Launch promised consultation on global voluntary carbon markets without further delay
We applaud the UK Government and civil society for leading the way in building a global voluntary carbon market. We appreciate the difficulty of achieving a global price for carbon, but it is ultimately needed to prevent a race to …
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Government Response
The government accepts the recommendation and states its intention to publish a consultation on voluntary carbon markets in early 2024. This consultation will seek views on government and regulatory interventions to enable market growth, endorse IC-VCM and VCMI outputs, and explore a new labelling scheme for UK credits.
27
Recommendation
Accepted
First Report - The financial secto…
Develop a UK Carbon Border Adjustment Mechanism to prevent carbon leakage
Having been a long-standing leader in climate finance, the UK now risks falling behind by failing to install mechanisms to mitigate carbon leakage. The EU has already launched its carbon border adjustment mechanism (CBAM). It is now over a year …
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Government Response
The government accepts the recommendation, stating it will implement a carbon border adjustment mechanism (CBAM) by 2027 to mitigate carbon leakage. A further consultation on the delivery of the CBAM will be conducted in 2024.
28
Recommendation
Accepted
First Report - The financial secto…
Maintain UK leadership in green finance and ensure global net zero policy alignment
The UK Government should be proud of its world-leading track record in supporting green finance initiatives. At the same time, it must neither be complacent nor lose momentum. The UK must continue to use its leadership position to bring other …
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Government Response
The government reiterates its commitment to net zero, highlighting its strong track record with significant investment in low-carbon energy sectors and a halving of emissions. They detail current actions like the Green Finance Strategy, £960m Green Industries Growth Accelerator, a £300m HALEU nuclear fuel program, and Transmission and Connections Action Plans to demonstrate continued momentum and leadership.
29
Conclusion
Accepted
First Report - The financial secto…
Local authorities hindered in green finance by fragmented funding and limited capacity
Local authorities have a significant role to play in green finance, from delivering grants at the household level, to collaborating with financial institutions on local net zero projects, and crowding in private capital for large scale projects. However, they are …
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Government Response
The government agrees on the importance of local authorities and outlines several initiatives to support them, including a £19m Local Net Zero Accelerator, Local Net Zero Hubs, UK Infrastructure Bank lending, and a commitment to simplify and consolidate funding, backed by the Funding Simplification Plan.
30
Recommendation
Accepted
First Report - The financial secto…
Increase overall funding envelope for the Boiler Upgrade Scheme, subject to uptake
We welcome the 50% increase permitted for individual grants under the Boiler Upgrade Scheme, and we would wish to see the overall envelope of funding increased subject to sufficient uptake. (Paragraph 162) The financial sector and the UK’s net ero …
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Government Response
The government confirms the increase in Boiler Upgrade Scheme grants to £7,500 and announces an additional £1.5 billion in funding for the scheme's extension from 2025-2028, directly addressing the call for an increased funding envelope.
31
Recommendation
Accepted in Part
First Report - The financial secto…
Reform local net zero funding by moving from competitive to needs-based and core grants
We welcome the work that the Government has done so far to provide a “one stop shop” of information on net zero grants to which local authorities can submit competitive bids. The Government appears to have streamlined the number of …
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Government Response
The government acknowledges the role of local authorities and is providing £19m for a Local Net Zero Accelerator programme with pilots in three areas, alongside existing programmes. It is exploring how to simplify and consolidate local net zero funds and has announced pilots for devolved building retrofit approaches, but does not commit to moving away from competitive grants or providing universal core funding for climate action for all councils.
32
Recommendation
Accepted
First Report - The financial secto…
Conduct a mapping exercise to target technical support for local authorities most in need.
We welcome the ongoing work to provide technical support and advice to local authorities, including through the Local Net Zero Hubs, UKIB, Net Zero Go, and the Local Net Zero Forum. We also welcome the Government’s intention to work with …
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Government Response
The government acknowledges variable capacity among local authorities but states existing support already considers technical assistance needs and Local Net Zero Hubs apportion resources based on regional priorities. They assert local authorities are best placed to assess their own needs, implying a rejection of a new mapping exercise.
Correspondence 8 letters
23 May 2024
To committee
Letter from the Parliamentary Under Secretary of State for Energy Efficiency and Green Finance, and from the HM Treasury Minister for Green Finance, responding to the 23 February 2024 letter of the Committee regarding The financial sector and the UK’s net zero transition, dated 16 May 2024
Parliament page
23 Feb 2024
To committee
Letter from the EAC Chair to the Treasury Lords Minister and the Minister for Energy Efficiency and Green Finance, concerning the Government's response to the EAC's report on The financial sector and the UK’s net zero transition, dated 23 February 2024
Parliament page
20 Jun 2023
To committee
Letter from the Minister of State for Energy Security and Net Zero providing an update on the Celtic Sea leasing round, dated 15 June 2023
Parliament page
19 Jun 2023
To committee
Letter from the Minister for Energy Efficiency and Green Finance (Department for Energy Security and Net Zero), relating to the 18 May 2023 evidence session on 'The financial sector and the UK’s net zero transition', dated 2 June 2023
Parliament page
30 Mar 2023
To committee
Letter from the EAC Chair to the Co-Chair of the Glasgow Financial Alliance for Net Zero, regarding the 24th October 2022 'The financial sector and the UK’s net zero transition' hearing, dated 25 January 2023
Parliament page
30 Mar 2023
To committee
Letter from the Co-Chair of the Glasgow Financial Alliance for Net Zero, responding to the Committee's letter of 25 January 2023, dated 23 March 2023
Parliament page
10 Nov 2022
Additional responses received to letters sent to signatories of the Glasgow Financial Alliance for Net Zero
Parliament page
18 Oct 2022
Responses received to letters sent to signatories of the Glasgow Financial Alliance for Net Zero
Parliament page