Posted on: March 25th, 2021
During UKSIF’s excellent ‘Ownership Day’ event today I was delighted to hear from their keynote speaker Mark Manning of the FCA, that the Chancellor of the Exchequer Rishi Sunak has formally written to Nikhil Rathi, Chief Executive of the FCA, with notification that the government now requires climate change to form part of the regulator’s core remit.*
Full information is available under the ‘news’ section of the government website – published on 24 March 2021 – under the heading ‘Climate Considerations now fully embedded across UK principle financial regulators’ .
The entire text is ‘cut and pasted’ below for your convenience:
The move raises global ambition ahead of COP26 in November where the UK is aiming to ensure every financial decision takes climate change into account.
Building on their existing body of climate change-related work, the Financial Conduct Authority (FCA) and Prudential Regulation Committee (PRC), which supervise financial services firms, should now take into account the Government’s legally binding commitment to transition to a net zero economy by 2050, following a letter from the Chancellor updating their respective remits today.
The letters set out the Government’s ambition to deliver a financial system which supports and enables a net zero economy, and mobilises private finance behind sustainable and resilient growth.
This follows the publication of the updated remits for the Bank of England’s Monetary Policy Committee (MPC) and Financial Policy Committee (FPC) at Budget 2021, which also reflect the importance of environmental sustainability and the transition towards net zero.
Transitioning to an environmentally sustainable and resilient net zero economy is a key pillar of the government’s economic strategy to achieve strong, sustainable and balanced growth.
The updated remit letters also support the UK’s plans to boost the competitiveness of its financial services sector by positioning it to seize the opportunities from the transition to net zero.
With regard to the FCA specifically you can download the HM Treasury FCA remit letter of 23 March 2021 here.
Key excerpts of this text are:
A. The government’s economic policy (page 4 of the letter above)
This document discharges the Treasury’s duties under section 1JA of the Act.A.
The government’s economic policy objective is to achieve strong, sustainable and
balanced growth. Price and financial stability are essential pre-requisites to achieve this
objective in all parts of the UK and sectors of the economy.
To achieve this objective, the government’s economic strategy consists of:
• operationally independent monetary policy, responsible for maintaining price
stability and supporting the economy;
• a credible fiscal policy, maintaining sustainable public finances, while providing
the flexibility to support the economy;
• structural reform to level up opportunity in all parts of the UK and to transition to
an environmentally sustainable and resilient net zero economy, including through
regulation, and an ambitious programme of investment in skills, infrastructure and
innovation, in order to sustain high employment, raise productivity and improve
• maintaining a resilient, effectively regulated and competitive financial system that
supports the real economy through the provision of productive finance and critical
financial services, while protecting consumers, safeguarding taxpayer interests and
supporting the transition to a net zero economy.
B. Matters about aspects of the government’s economic policy to which the Financial
Conduct Authority should have regard….
vii. Climate Change
The government wishes to deliver a financial system which supports and enables a net zero economy by mobilising private finance towards sustainable and resilient growth and is resilient to the physical and transition risks that climate change presents. The FCA should have regard to the government’s commitment to achieve a net-zero economy by 2050 under the Climate Change Act 2008 (Order 2019) when considering how to advance its objectives and discharge its functions.
This is also reflected in Rishi Sunak’s ‘Recommendations for the FCA’ correspondance, in the following text:
vii. Climate Change
The government wishes to deliver a financial system which supports and enables a net-zero economy by mobilising private finance towards sustainable and resilient growth and is resilient to the physical and transition risks that climate change presents. The FCA should have regard to the government’s commitment to achieve a net-zero economy by 2050 under the Climate Change Act 2008 (Order 2019) when considering how to advance its objectives and discharge its functions.
* I am in part delighted to hear this as it is something I have wanted to see, and called for, for a couple of years – although I rather doubt I was alone!