The UK’s financial regulators will be required going forward to embed climate change considerations in their decisions and actions, according to HM Treasury, the government’s economic and finance ministry.
UK Chancellor of the Exchequer Rishi Sunak sent letters to the Financial Conduct Authority (FCA) and Prudential Regulation Committee (PRC), which supervise financial services firms, updating their remits with new directions to incorporate the government’s commitment to achieve a net-zero economy by 2050 when considering how to advance its objectives and discharge its functions.
The letters follow recently updated remits to the Bank of England’s Monetary Policy Committee (MPC) and Financial Policy Committee (FPC), also reflecting the importance of environmental sustainability and the transition towards net zero in their mandates.
In his letter to the Governor of the Bank of England Andrew Bailey updating the FPC remit, Sunak wrote:
“As the world recovers from the pandemic, we also face a tipping point for our climate. The shift to a world where we are at net zero will mean systemic changes across all parts of our economy. This includes delivering a financial system which supports and enables the transition to an environmentally sustainable net zero economy by expanding the supply of green finance, and that is resilient to the physical and transition risks that climate change presents.”
According to HM Treasury, 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.