Recommendations & Conclusions
24 items
1
Recommendation
Thirteenth Report - Net zero and the Fu…
Not Addressed
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 were required to be provided without delay the Treasury should …
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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 were required to be provided without delay the Treasury should set out why it did not include green conditionality for the Recovery Loan Scheme announced in the 2021 Budget.
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Government response AI summary
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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HM Treasury
2
Recommendation
Thirteenth Report - Net zero and the Fu…
Acknowledged
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 net zero, coordinating the roles of different departments, and ensuring …
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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 net zero, coordinating the roles of different departments, and ensuring that the UK remains on track to meet its net zero target in a cost-effective way.
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Government response AI summary
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 …
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HM Treasury
3
Recommendation
Thirteenth Report - Net zero and the Fu…
Not Addressed
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 fail to meet their targets.
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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 fail to meet their targets.
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Government response AI summary
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 …
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HM Treasury
4
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 AI summary
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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HM Treasury
5
Recommendation
Thirteenth Report - Net zero and the Fu…
Not Addressed
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 include in the Net Zero Review final report its own …
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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 include in the Net Zero Review final report its own methodology on costs; and it should set out clearly where the uncertainties lie. The Treasury should also include a range of scenarios on how net zero might be achieved, and the associated cost for each scenario.
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Government response AI summary
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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HM Treasury
6
Recommendation
Thirteenth Report - Net zero and the Fu…
Not Addressed
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 those decisions, and the Government should set out a framework …
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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 those decisions, and the Government should set out a framework and strategy for supporting those communities which will be most impacted by these changes. This is especially important given the Government’s commitment to a Just Transition as part of the Paris Agreement. (Paragraph 53) Green finance to support green decarbonisation
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Government response AI summary
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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HM Treasury
7
Conclusion
Thirteenth Report - Net zero and the Fu…
Accepted
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 ensure that consistent policy signals are sent to investors. We …
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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 ensure that consistent policy signals are sent to investors. We are encouraged that the Government acknowledged these needs in the 2021 Budget. (Paragraph 59) Net zero and the Future of Green Finance 53
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Government response AI summary
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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HM Treasury
8
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 runs the risk of holding back the development of a …
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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 runs the risk of holding back the development of a private sterling green bond market. Although concerns about the potential for green bonds to be a more expensive form of debt for the Government seem to have dissipated to a degree, the Government should none the less set out its tolerance, when issuing such bonds, for them to be more expensive than other forms of Government debt.
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Government response AI summary
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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HM Treasury
9
Conclusion
Thirteenth Report - Net zero and the Fu…
Acknowledged
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 process and will examine how any changes are enacted, and …
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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 process and will examine how any changes are enacted, and how those changes impact on the other policy objectives and the independence of the Monetary Policy Committee.
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Government response AI summary
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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HM Treasury
10
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted in Part
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 should set out the timeframe for the launch of the …
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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 should set out the timeframe for the launch of the announced ‘long term asset fund’ to allow pension savers to invest in long-term projects. We would expect that such an LTAF would be focused on providing a net-zero compliant product.
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Government response AI summary
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 …
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HM Treasury
11
Recommendation
Thirteenth Report - Net zero and the Fu…
Acknowledged
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 AI summary
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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HM Treasury
12
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 out how the Bank will meet the Government’s commitment to …
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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 out how the Bank will meet the Government’s commitment to Net Zero. The Government should also set out how it will incorporate lessons learned from the former Green Investment Bank, and whether it intends that the UK Infrastructure Bank should be funded to offer a lending facility at a level similar to that offered by the European Investment Bank before the UK referendum on membership of the EU. (Paragraph 95) The role of consumers
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Government response AI summary
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 …
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HM Treasury
13
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 more green alternatives, but at the same time maintains that …
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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 more green alternatives, but at the same time maintains that consumers should not have to switch out of the default fund to invest sustainably. The Government should resolve this apparent contradiction. At present the Treasury is relying on a blend of disclosure, regulation and public investment to foster a transition towards more sustainable investment. For now, we support that approach, but the Treasury should report regularly on the proportion of pension holders in defined contribution pension schemes who remain in the default fund, and the extent to which those default funds are aligned with a path to Net Zero. (Paragraph 108) 54 Net zero and the Future of Green Finance
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Government response AI summary
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 …
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HM Treasury
14
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 been entirely successful. In its phased approach to implementing the …
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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 been entirely successful. In its phased approach to implementing the regulations, the Pensions Regulator will need to consider how to reach smaller pension schemes. The draft regulations appear to exclude the smallest trust schemes. However, when their effects are aggregated, they may still have an impact on meeting the net zero target. In responding to this Report, the Government should set out how these smaller funds will be encouraged to integrate climate governance and reporting requirements.
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Government response AI summary
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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HM Treasury
15
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 and priorities, and uses its powers, to prevent ‘greenwashing’ of …
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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 and priorities, and uses its powers, to prevent ‘greenwashing’ of financial products available to consumers.
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Government response AI summary
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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HM Treasury
16
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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. The Treasury and the Financial Conduct Authority should consult on …
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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. The Treasury and the Financial Conduct Authority should consult on the merits of making climate or carbon labels for consumer financial products mandatory, as a means to encourage innovation. The FCA should consult on how best to make such labels readily and widely understood.
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Government response AI summary
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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HM Treasury
17
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 indices that their passive investments are tracking. The Treasury and …
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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 indices that their passive investments are tracking. The Treasury and regulators should therefore ensure that all indices (whether conventional or climate- friendly) clearly set out the overall carbon footprint of the assets included within indices.
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Government response AI summary
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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HM Treasury
18
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 descriptions of ‘green’ or ‘climate-related’ indices do not necessarily match …
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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 descriptions of ‘green’ or ‘climate-related’ indices do not necessarily match legitimate consumer expectations of what they would commonly be understood to mean. The Treasury and FCA should review the provisions in the legislative and regulatory framework and ensure that the labels and descriptions of indices accurately reflect their content, in line with consumer expectations.
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Government response AI summary
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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HM Treasury
19
Recommendation
Thirteenth Report - Net zero and the Fu…
Deferred
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. The Financial Conduct Authority should seriously consider undertaking further “green …
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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. The Financial Conduct Authority should seriously consider undertaking further “green fintech challenges” to encourage innovation. The regulator should also set out how it will tackle remaining regulatory barriers which discourage innovative ‘green’ financial products from coming to market. The Government and the regulators Net zero and the Future of Green Finance 55 should work more closely with the Green Finance Institute to bring innovative ideas which will benefit consumers to the market.
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Government response AI summary
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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HM Treasury
20
Recommendation
Thirteenth Report - Net zero and the Fu…
Deferred
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.
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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.
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Government response AI summary
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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HM Treasury
21
Recommendation
Thirteenth Report - Net zero and the Fu…
Deferred
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 might consider appropriate for the capital regime to better accommodate …
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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 might consider appropriate for the capital regime to better accommodate the climate risk associated with different investments. It should set out its views on the options for amending the capital regimes to reflect its new remit, taking into account the potential interaction with the other aims of prudential policy.
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Government response AI summary
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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HM Treasury
22
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 the Joint Government Regulator TCFD Taskforce. The Treasury, via the …
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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 the Joint Government Regulator TCFD Taskforce. The Treasury, via the Taskforce, will need to play a key role in ensuring that pressure is maintained for a consistent and rapid implementation of these disclosures.
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Government response AI summary
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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HM Treasury
23
Conclusion
Thirteenth Report - Net zero and the Fu…
Accepted
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 AI summary
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 …
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HM Treasury
24
Recommendation
Thirteenth Report - Net zero and the Fu…
Accepted
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 legislative pathway to deliver a UK taxonomy ahead of COP26 …
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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 legislative pathway to deliver a UK taxonomy ahead of COP26 in November 2021. The UK can utilise the EU’s taxonomy but can exceed it when it will assist the UK’s goals. The UK should seize the opportunity presented by COP26 to use its own work on a taxonomy to push for greater international convergence. (Paragraph 192) 56 Net zero and the Future of Green Finance
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Government response AI summary
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.
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HM Treasury