The Financial Services and Markets Bill has presented us with more of the same Conservative agenda – deregulation, and lip service to climate goals.

Olivia Blake is the Labour MP for Sheffield, Hallam

This Wednesday, the Financial Services and Markets Bill will return to the House of Commons Chamber before being sent to the Lords. The legislation is important because it establishes the post-Brexit regulatory regime for the UK finance sector and presents an opportunity to set out a new responsible, green vision for the City and financial services.

But the Government is squandering that opportunity. Instead, they are opting to create a second Thatcherite “Big Bang”, to quote Rishi Sunak – a deregulatory model that previously laid the foundations for the stagnation and crisis we have been living through for over a decade.

Rather than turn the clock back, this should be the chance to create an ethically responsible system that works for people and planet. To tackle the twin climate and nature crises, we will have to engage every part of our economy and our society – especially the finance sector.

Globally, privately invested financial assets are expected to reach $145.4 trillion by 2025 – a 250% growth in less than 20 years. In the UK, pensions assets amount to a staggering £2.7 trillion, with global investment in pensions constituting a breath-taking half of all the money in the world.

An estimated £90 trillion of infrastructure investment is required by 2030 to decarbonise the global economy. In the UK, private investment in carbon-cutting activities needs to grow by an extra £140bn over the next five years to reach our net-zero goals.

We should be mobilising the vast resources in the finance system to meet the existential challenge of the climate crisis. Instead, the financial institutions are adding fuel to the fire. 

The world’s three largest asset managers have a combined £300 billion invested in fossil fuels. That includes money from private savings and pensions. In the five years since the Paris Agreement, the world’s 60 largest banks have financed $3.8 trillion of fossil fuel investment.

If the City of London were a country, the emissions it finances would make it the ninth largest polluter in the world. Between 2016-2021, HSBC and Barclays provided $107.44 bn to the top 50 companies expanding upstream oil and gas.

The legislation passing through parliament could put a stop to this and reshape the system for good. Instead, the Bill mandates regulators to promote the ‘growth and competitiveness’ of the sector – which is already disproportionately large as a share of our economy – while only saying they should have ‘regard to’ net zero targets. The former is a statutory aim, whereas the latter is only a regulatory principle to be balanced against others.

And on the duties of investors and financial institutions, the Bill could do so much more. It is the opportunity to move more rapidly on instituting mandatory net-zero transition plans – but they are missing from the legislation. The plans are important because they move financial institutions away from simply reporting and sharing information, to concrete climate action.     

Not only do we need to encourage and incentivise fossil fuel divestment, but also ensure that investors are engaging with and making demands of companies on climate action. That means raising capital requirements and the level of risk associated with fossil fuel investments to disincentivise banks from financing them; but it also means raising the bar on stewardship rules so that climate and nature form critical points of investor engagement with companies.    

It should also mean expanding the concept of fiduciary duty, shifting it away from gaining financial returns for beneficiaries at any cost, to thinking about the kind of world pension holders retire into – or the world in which their children will grow up. Pension investors have a duty to their customers to ensure that world isn’t wracked by fires, flash flooding, famine, and freak weather, all driven by the climate emergency.

Not only does the Bill fall short, but it could even exacerbate some of the consequences of the climate crisis we are already seeing. Global heating has made our food supply even more insecure. In dumping the MIFID II regulations, the Bill makes speculation of food even more likely, driving up prices and deepening the cost of the climate emergency for communities across the globe.

As the clock ticks on climate action, now is the time to pull every lever and seize every opportunity to decarbonise our society and our economy. But the Financial Services and Markets Bill has presented us with more of the same Conservative agenda – deregulation, and lip service to climate goals. As the slogan goes, we need system change not climate change. So far, the Bill has given us the opposite. 

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