Written by Harrison Folland 

On 22 April, the House of Commons Treasury Committee (the "Committee") published its Thirteenth Report of Session 2019-21 on Net Zero and the Future of Green Finance (the "Report").

The Report's recommendations

The wide-ranging Report makes a series of recommendations as to how the UK government can achieve net zero by 2050, including (non-exhaustively) that the Committee considers that:

1. consultation between HM Treasury and the FCA should take place regarding the mandatory labelling of green products to enable consumers to assess the relative climate impacts and make their choices accordingly;
2. the Treasury must work with the FCA to ensure that it has the appropriate remit, powers and priorities (and uses its powers) to prevent greenwashing of those financial products available to consumers;
3. the FCA should consider further fintech challenges in order to encourage innovation and tackle any remaining regulatory barriers that prevent innovative green financial products from reaching the market;
4. the Committee recognises that many defined contribution pension schemes are invested in their pension’s default fund. The Committee notes that HM Treasury's position is that it will not require default funds to move to greener alternatives but maintains that consumers should not have to switch in order to invest sustainably; the Committee considers that this apparent contradiction should be resolved by HM Treasury, who should also report on the proportion of holders of defined contribution pension schemes who remain in the default fund and the extent to which those default funds align with a path to net zero.
5. the UK is expected to issue a green sovereign bond in summer 2021 and is lagging behind other countries in this regard; the UK government should set out its tolerance for these bonds to be more expensive than other forms of government debt, when issued.
6. the PRA and FCA should incorporate their revised remits to include climate change;
7. there should be clarity about who will have access to the proposed Long Term Asset Fund ("LTAF"). The Chancellor and UK financial regulators should set out the timeframe for the launch of the announced LTAF to allow pension savers to invest in long-term projects. The Committee expects that an LTAF would be focused on providing a net-zero compliant product; and
8. the UK government should set out the principles on which the UK will fund its transition to net zero, given that the overall cost of achieving the goal is uncertain.