Managing the risks and opportunities associated with climate change is crucial to maintain the resilience of the financial system, the integrity of UK markets, and ensure a smooth and effective transition to net zero. As regulators, we have a key role in understanding the financial risks and opportunities relevant to our mandates and establishing and maintaining credible standards, which can also facilitate mobilising finance to support the transition and enable the Government to achieve its ambitions to foster the world’s first net-zero aligned financial centre.
Since the Government’s 2019 Green Finance Strategy, we have taken steps to embed climate considerations in our work. We are now actively supervising and holding organisations within our regulatory perimeter (both real economy and financial services) to account on climate-related matters. For example, greenwashing represents a real risk to the transition, to market integrity and to investors. We are addressing this within our respective regulatory roles to ensure that the market receives better and more reliable information to support the objectives of the Green Finance Strategy.
We stand ready, consistent with our objectives, to support the Government in the implementation of relevant policy initiatives, such as the economy-wide Sustainability Disclosure Requirements, and in the endorsement of the International Sustainability Standard Board’s (ISSB) forthcoming disclosure standards in its pursuit of the objectives of the Green Finance Strategy.
As part of our coordinated response to the Green Finance Strategy, our cross-regulatory working group will continue to ensure coordination in cross-regulator delivery of green finance ambitions.
Nikhil Rathi, Chief Executive Officer of the Financial Conduct Authority said: 'We welcome this updated Green Finance Strategy, which represents an important milestone, building on collective efforts to date and setting out a clear plan for the future. We are working hard to ensure that the UK market is well positioned to support the transition to net zero. We’re playing our part in delivering a world-leading framework for transition plan disclosures through our collaboration with the UK Transition Plan Taskforce.
'We’re putting the right information in the hands of investors by working closely with the International Sustainability Standards Board. And we’re continuing our work to help consumers through product labelling. We look forward to continuing to work closely with government and regulators to support the delivery of the Green Finance Strategy.'
Charles Counsell, Chief Executive of The Pensions Regulator said: 'We welcome the updated Green Finance Strategy and its renewed focus on climate change, which will remain a core financial risk for some time to come. If not properly managed, climate-related risks can have a negative impact on scheme investments, funding, and employer covenants, leaving some savers poorer in retirement.
'It is crucial that trustees effectively manage material climate-related risks and opportunities for savers, and we will keep our focus on tackling poor standards of governance and risk management in pensions. TPR will continue to work closely with the government and other financial regulators to ensure that we are joined-up in our efforts to address these challenges for pension schemes.'
Sir Jonathan Thompson, Chief Executive Officer of the Financial Reporting Council said: 'We all need to play our part in the net zero transition and ensure that the economy is resilient and prepared for managing climate-related risks. As the regulator for company reporting and audit, the FRC will continue to hold organisations to account for transparent disclosures on their plans and actions to address climate risks and opportunities.
'Reliable information, free from greenwashing, and subject to high-quality assurance is critical both to public trust and the effective functioning of capital markets and the success of the Green Finance Strategy. We look forward to continuing our collaboration with other regulators in support of the UK’s ambitions.'
Andrew Bailey, Governor of the Bank of England said: 'Climate change affects our planet, our economy and our financial system. It is undeniably relevant to the Bank of England and the objectives it is tasked to meet. We are working to ensure that the macroeconomy, the financial system, and the Bank of England itself are resilient to the risks from climate change and support the transition to net-zero.
'We therefore welcome, and are proud to have contributed to, the UK Government's updated Green Finance Strategy – a strategy that will help to deliver the cross-economy transition that will be required to meet net zero.'
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