Amendment proposes adding nature to UK net-zero legislation

The United Kingdom’s House of Lords has recently accepted an amendment to the Financial Services and Markets Bill (FSMB) to integrate nature into the fresh regulatory principle concerning net-zero emissions. Baroness Hayman tabled this groundbreaking amendment, calling for the Financial Conduct Authority (FCA) and the Prudential Regulation Authority to consider and contribute towards commitments addressing not only climate change but also biodiversity loss.

Voluntary action is insufficient

In the Bill’s debate in the Lords earlier this week, Baroness Hayman emphasised the necessity for a systematic approach to environmental sustainability within the financial sector. She acknowledged current initiatives like the Taskforce on Nature-related Financial Disclosures (TNFD), praising their potential contributions. However, she cautioned that sole reliance on voluntary actions and market forces will not spur transformation at the required pace and scale.

In her words: “I recognise that various initiatives are underway, such as the work of the Taskforce on Nature-related Financial Disclosures (TNFD), which will undoubtedly make a contribution over time, but relying on voluntary action and market forces will not produce a transformation at the pace and scale required.”

Echoing this sentiment, WWF’s Chief Economist Karen Ellis conveyed her delight at the prospect of safeguarding nature as a recognised regulatory principle, alongside net-zero. Ellis called on the government to embrace this amendment wholeheartedly.

The ongoing discussions and debates on the Bill in the Lords are set to continue into next week before entering the final stages.

Biodiversity must be a priority

Another strong proponent of the amendment, Baroness Boycott, called attention to the disconnect between the government’s stated commitment to halt deforestation and the reality of financial support from British banks and investors to corporations contributing to the destruction of tropical forests. She argued that this discrepancy demonstrates the lack of real prioritisation given to the issue.

Baroness Boycott’s amendment requests that financial institutions perform straightforward checks to ensure they are not inadvertently supporting companies engaged in illegal deforestation. She argued that compliance with the TNFD does not necessitate a change in financing; however, without mandatory action, it will not prevent UK finance from aiding deforestation offenders.

This landmark amendment seeks to not only address climate change but also to champion biodiversity, in a bid to foster a more comprehensive approach to environmental sustainability in the financial services sector. As it progresses through the legislative process, the amendment has the potential to set a significant precedent for the integration of environmental principles into financial regulation, not just in the UK, but globally.

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