Decarbonisation and Green Finance

Treasury Committee Closed Inquiry
Opened: 3 Mar 2020 Closed: 20 Jan 2022 Parliament page
The Treasury Committee has re-launched an inquiry into the decarbonisation of the UK economy and green finance. This inquiry 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 … Read more
21 Recommendations
3 Conclusions
1 Report
10 Letters
5 Events
Activity timeline 12 events
16 Jul
2021
Report published
22 Apr
2021
Report published
7 Jan
2021
Correspondence
15 Dec
2020
Correspondence
10 Dec
2020
Correspondence
26 Nov
2020
Correspondence
4 Nov
2020
Correspondence
1 Oct
2020
Correspondence
11 Mar
2020
Correspondence
11 Mar
2020
Correspondence
11 Mar
2020
Correspondence
10 Mar
2020
Correspondence
Title HC No. Published Items Response
Thirteenth Report - Net zero and the Future of Green Finance HC 147 22 Apr 2021 24 Responded
Recommendations & Conclusions
24 results
1 Recommendation Not Addressed
Thirteenth Report - Net zero and t…
Although the Government has emphasised the need for a “green” recovery, we note it has...
Although the Government has emphasised the need for a “green” recovery, we note it has not, except in limited circumstances, imposed green conditionality on the support it has provided during the coronavirus pandemic. Whilst it is clear that support schemes … Read more
Government Response
The government's response discusses the issuance of green bonds and gilts, but does not address the recommendation to explain why green conditionality was not included in the Recovery Loan Scheme.
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2 Recommendation Acknowledged
Thirteenth Report - Net zero and t…
The Government has made bold claims that the economic recovery will be a green recovery.
The Government has made bold claims that the economic recovery will be a green recovery. In order to achieve that, the Government needs to set out in its Net Zero Strategy who, at ministerial level, will be responsible for delivering … Read more
Government Response
The government states the Net Zero Strategy will set out its vision for transitioning to a net zero economy, and lead delivery departments are responsible for sectoral strategies, but it does not specify who at ministerial level will be responsible or how coordination will be ensured.
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3 Recommendation Not Addressed
Thirteenth Report - Net zero and t…
In the Net Zero Review final report, the Government should set out what mechanisms it...
In the Net Zero Review final report, the Government should set out what mechanisms it will put in place to integrate the net zero target within departments’ spending review commitments, and how departments will be held to account should they … Read more
Government Response
The government stated that lead departments are responsible for and produce sectoral strategies, citing the BEIS Industrial Decarbonisation Strategy as an example, but did not set out specific mechanisms for integrating net zero targets into spending review commitments or how departments would be held accountable for failing targets.
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4 Recommendation Accepted
Thirteenth Report - Net zero and t…
The Chancellor should publish the Net Zero Strategy as soon as possible and should set...
The Chancellor should publish the Net Zero Strategy as soon as possible and should set out, in conjunction with the Net Zero Review final report, the principles upon which the UK will fund its transition to net zero carbon emissions by 2050.
Government Response
The government announced a commitment to issue at least £15bn of green gilts in FY 2021/22 and published the UK Government Green Financing Framework to fund green expenditures.
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5 Recommendation Not Addressed
Thirteenth Report - Net zero and t…
There are a number of different estimates of the cost of achieving net zero by...
There are a number of different estimates of the cost of achieving net zero by 2050. However, the Government has not yet committed to its own cost estimates and should set these out as soon as possible. The Government should … Read more
Government Response
The government deflects the request for its own net zero cost estimates, methodologies, uncertainties, and scenarios in the Net Zero Review, stating instead that lead delivery departments produce sectoral strategies.
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6 Recommendation Not Addressed
Thirteenth Report - Net zero and t…
The Treasury’s Net Zero Review final report should include clear sectoral pathways towards decarbonisation and...
The Treasury’s Net Zero Review final report should include clear sectoral pathways towards decarbonisation and should address the key policy decisions as to the future of high carbon industries. Particular attention should be given to the potential regional impact of … Read more
Government Response
The government states that lead delivery departments are responsible for and produce sectoral strategies, citing the Industrial Decarbonisation Strategy, but does not commit to including clear sectoral pathways or a support framework for impacted communities in the Net Zero Review final report.
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7 Conclusion Accepted
Thirteenth Report - Net zero and t…
The Government has recognised that private finance will need to play a key part in...
The Government has recognised that private finance will need to play a key part in funding the transition to net zero. If it is to do so, the Government will need to provide long-term certainty in climate-related policy and must … Read more
Government Response
The government highlights its existing commitments, including the 2019 net-zero target, ambitious interim targets, and the 2019 Green Finance Strategy, as evidence of providing long-term certainty in climate-related policy.
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8 Recommendation Accepted
Thirteenth Report - Net zero and t…
We welcome the announcement in the 2021 Budget of a timetable for the issuance of...
We welcome the announcement in the 2021 Budget of a timetable for the issuance of the UK’s first green sovereign bond or ‘green gilt’. However, the UK is lagging behind other countries in the issuance of these green bonds. This … Read more
Government Response
The government states it is confident that the inaugural green gilt will price competitively relative to conventional gilts. It reiterates its debt management objective to minimise long-term costs, thereby setting out its low tolerance for green bonds being more expensive.
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9 Conclusion Acknowledged
Thirteenth Report - Net zero and t…
We note the new remit provided to the Monetary Policy Committee, which will allow it...
We note the new remit provided to the Monetary Policy Committee, which will allow it to rebalance its Corporate Bond Purchase Scheme to take account of the climate impact of the bonds it holds. We will continue to scrutinise this … Read more
Government Response
The government clarified that the MPC's primary objective is price stability, and its secondary objective, updated to include environmental sustainability, leaves it to the Bank of England to determine how to support these goals.
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10 Recommendation Accepted in Part
Thirteenth Report - Net zero and t…
We note the debate at the Productive Finance Working Group Steering Committee on retail access...
We note the debate at the Productive Finance Working Group Steering Committee on retail access to the ‘long term asset fund’ (LTAF). There should be clarity about who will have access to the LTAF. The Chancellor and the financial regulators … Read more
Government Response
The government states the FCA has consulted on LTAF rules, expected to be finalised in Autumn, but cannot commit to a launch timeframe as it's industry-led. It notes that while LTAFs can support net-zero transition, the FCA is not proposing to mandate investment in specific assets.
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11 Recommendation Acknowledged
Thirteenth Report - Net zero and t…
The Treasury should, as part of its review of Solvency II, consider reforms that could...
The Treasury should, as part of its review of Solvency II, consider reforms that could improve the funding of sustainable green infrastructure while maintaining the financial stability of insurers.
Government Response
The government agrees with the recommendation and states it wants a more proportionate and flexible regulatory regime. It notes that it has published a response to its Call for Evidence on Solvency II setting out next steps for the insurance sector.
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12 Recommendation Accepted
Thirteenth Report - Net zero and t…
In the proposed framework for the new UK Infrastructure Bank, the Chancellor should clarify its...
In the proposed framework for the new UK Infrastructure Bank, the Chancellor should clarify its governance arrangements, how investment decisions will be made, and how it will ensure that it attracts sufficient private capital. In particular, it should clearly set … Read more
Government Response
The government published a framework document detailing the UK Infrastructure Bank's governance, investment principles, and climate objectives, confirming lessons from the Green Investment Bank were incorporated. It detailed the bank's £12bn capital and £10bn guarantees expected to crowd in over £40bn private investment, with a review planned by Spring 2024.
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13 Recommendation Accepted
Thirteenth Report - Net zero and t…
There is a high level of inertia amongst consumers around defined contribution pension fund choice,...
There is a high level of inertia amongst consumers around defined contribution pension fund choice, with most remaining in the ‘default’ fund. The Treasury has been robust in its view that default funds should not be required to move to … Read more
Government Response
The government clarified it does not mandate specific pension investments but relies on disclosure and regulation to foster sustainable investment, noting 15 out of 17 leading DC providers have net-zero commitments. It also confirmed that existing TPR reporting covers default fund proportions and that upcoming mandatory DWP and FCA TCFD reporting, including climate targets, will enable regular reporting on default fund alignment with Net Zero.
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14 Recommendation Accepted
Thirteenth Report - Net zero and t…
Consumers who hold defined benefits pensions have no choice as to how their assets are...
Consumers who hold defined benefits pensions have no choice as to how their assets are allocated. They rely upon their trustees. We note that previous attempts to get defined benefit schemes to acknowledge Environmental Social and Governance concerns have not … Read more
Government Response
The government states that smaller occupational schemes are already required to consider and report on climate change via their Statement of Investment Principles. It further explains that the Pensions Regulator has a climate change strategy featuring annual scheme returns, enforcement, and transparency to improve compliance.
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15 Recommendation Accepted
Thirteenth Report - Net zero and t…
The financial services industry broadly accepts that ‘greenwashing’ is detrimental to good consumer outcomes and...
The financial services industry broadly accepts that ‘greenwashing’ is detrimental to good consumer outcomes and to the achievement of the net zero goal. The Treasury must work with the FCA to ensure that the regulator has the appropriate remit, powers … Read more
Government Response
The government announced a UK green finance taxonomy in November 2020 to provide a common definition for sustainable economic activities, reduce greenwashing, and confirmed that the Treasury is working closely with the FCA on this.
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16 Recommendation Accepted
Thirteenth Report - Net zero and t…
Financial products should be clearly labelled to allow consumers to assess the relative climate impacts...
Financial products should be clearly labelled to allow consumers to assess the relative climate impacts of products and to make choices accordingly. However, allowing every firm to create its own consumer sustainability labels may lead to inconsistencies and consumer confusion. … Read more
Government Response
The government will work with the FCA to introduce a sustainable investment label, enabling consumers and retail investors to compare the impacts and sustainability of their investments.
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17 Recommendation Accepted
Thirteenth Report - Net zero and t…
We note the concerns expressed about indices, in that the most popular may be carbon-intensive,...
We note the concerns expressed about indices, in that the most popular may be carbon-intensive, and those that purport to be green may have carbon-intensive constituents. The risk remains that many consumers are unaware of the carbon- intensity of the … Read more
Government Response
The government states that the existing Benchmarks Regulation, amended in 2019, already places regulatory requirements and disclosure standards on financial indices, including specific low-carbon benchmarks, to enhance transparency and comparability.
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18 Recommendation Accepted
Thirteenth Report - Net zero and t…
On the concerns around the constituents of indices described as ‘green’, we note the requirements...
On the concerns around the constituents of indices described as ‘green’, we note the requirements under the Benchmarks Regulation, which should be used to help consumers make better choices. However, it is clear that in some cases the labels or … Read more
Government Response
The government highlights the existing Benchmarks Regulation for obliging providers to disclose sustainability metrics, which aids consumer verification. The Treasury will continue to work closely with the FCA on these issues to ensure accurate index labelling.
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19 Recommendation Deferred
Thirteenth Report - Net zero and t…
The Government’s Green Finance Strategy noted the need for innovation in green finance products and...
The Government’s Green Finance Strategy noted the need for innovation in green finance products and services, yet the evidence we have received suggests that the pace of innovation could be accelerated and that more could be done to encourage take-up. … Read more
Government Response
The government redirected the committee to the FCA's response for information on encouraging innovation in green finance products and tackling regulatory barriers.
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20 Recommendation Deferred
Thirteenth Report - Net zero and t…
The Prudential Regulation Authority and Financial Conduct Authority should move quickly to incorporate their revised...
The Prudential Regulation Authority and Financial Conduct Authority should move quickly to incorporate their revised remits to include climate change. We will continue to monitor their progress and ongoing approach to the risks arising from climate change. Read more
Government Response
The government redirects the committee to the responses from the Financial Conduct Authority and the Bank of England for further information on this matter.
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21 Recommendation Deferred
Thirteenth Report - Net zero and t…
We have heard differing evidence on whether there should be amendments to the capital regimes...
We have heard differing evidence on whether there should be amendments to the capital regimes to promote net zero. In light of its new remit letter, the Bank of England must now explain its thinking, as to what measures it … Read more
Government Response
The government redirected the committee to the Bank of England's response for information on measures for the capital regime to accommodate climate risk.
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22 Recommendation Accepted
Thirteenth Report - Net zero and t…
The Government has moved from a voluntary to a mandatory approach for ensuring that firms...
The Government has moved from a voluntary to a mandatory approach for ensuring that firms make climate-related financial disclosures. But the process will be run to different timetables for different firms, across different regulators according to the Roadmap published by … Read more
Government Response
The government has made significant progress towards mandatory climate-related financial disclosures across the economy, with ongoing consultations and the Chancellor's announcement of economy-wide sustainability disclosure requirements. These include legislation and a roadmap to be published before COP26.
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23 Conclusion Accepted
Thirteenth Report - Net zero and t…
We also draw the Treasury’s attention to evidence suggesting that the disclosure regime could be...
We also draw the Treasury’s attention to evidence suggesting that the disclosure regime could be widened in scope, and that firms might usefully offer fuller disclosures.
Government Response
The government states it has made significant progress, including FCA and DWP consultations to extend and introduce TCFD-aligned disclosures. The Chancellor announced economy-wide sustainability disclosure requirements, which will be wider in scope, incorporate TCFD, and include the UK green taxonomy, with legislation and a roadmap planned before COP26.
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24 Recommendation Accepted
Thirteenth Report - Net zero and t…
A taxonomy is an important part of identifying what can be considered green investment, so...
A taxonomy is an important part of identifying what can be considered green investment, so the announcement of a UK taxonomy is welcome. The Treasury and regulators should work at speed to ensure that there is a clear timetable and … Read more
Government Response
The government has initiated a UK Green Taxonomy, established a Green Technical Advisory Group, is active in international convergence efforts, and will legislate Technical Screening Criteria by January 2023. A Roadmap for green finance regulation will be published before COP26.
HM Treasury
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Government Response AI assessment · 24 of 21 classified
Accepted 13
Accepted in Part 1
Acknowledged 3
Deferred 3
Not Addressed 4
Total 21 recs + 3 conclusions
Correspondence 10 letters
7 Jan 2021 To committee Letter from Economic Secretary relating to Decarbonisation and Green Finance, dated 16 December 2020
Parliament page
15 Dec 2020 To committee Letter from the Exchequer Secretary relating to the Committee session on 16 November, dated 23 November 2020
Parliament page
10 Dec 2020 To committee Letter from Director General Association of British Insurers relating to Decarbonisation inquiry, dated 23 November 2020
Parliament page
26 Nov 2020 To committee Letter from the Co-Chair of the Association of Member Nominated Trustees relating to Inquiry into decarbonisation and green finance, dated 28 October 2020
Parliament page
4 Nov 2020 To committee Letter from Sarah Breeden, Executive Director, Prudential Regulation Authority, following the evidence session on 30 September 2020, dated 19 October 2020
Parliament page
1 Oct 2020 To committee Letter from Chris Cummings, Chief Executive, the Investment Association, relating to the Committee's evidence session on 3 September, dated 24 September
Parliament page
11 Mar 2020 To committee Letter from Chair to Governor regarding Climate Risk 20200203
Parliament page
11 Mar 2020 To committee Letter from Chair to FCA CEO Andrew Bailey regarding Climate Risk 20200203
Parliament page
11 Mar 2020 Governor to Chair letter regarding Climate Risk
Parliament page
10 Mar 2020 From committee AJB CEO of FCA letter to Chair regarding Climate Risk
Parliament page