The impact of UK overseas aid on environmental protection and climate change adaptation and mitigation

Written evidence submitted by HM Treasury

UK Financial Investments (UKFI) was established by the previous Government to manage its shares in financial institutions at arm’s-length from Government and on a commercial basis. UKFI’s overarching objective is to develop and execute an investment strategy for disposing of Government’s investments in an orderly and active way, within the context of protecting and creating value for the taxpayer as shareholder, paying due regard to financial stability and promoting competition.

In line with its remit to manage investments commercially and at arm’s length, UKFI’s engagement with investee banks on environmental and other such issues is at a strategic rather than on a day-to-day, issue-by-issue level. In particular, if it proved to be the case that any of the Government’s investee banks’ sustainability policies were significantly out of line with existing regulatory standards and guidelines such that they would have a negative effect on the value of the company and its shares, UKFI would engage with the bank’s senior management or board to protect the value of the Government’s holding.

In February 2010 UKFI published a Sustainability Policy. This sets out UKFI’s expectations with respect to the investee companies’ approaches to sustainability, including environmental issues. In particular, UKFI expects investee companies to act ethically and sensibly on sustainability issues; and to set out clearly which ethical and environmental standards it has committed to adhere to and report against, and to explain why it has chosen these principles.

UKFI has continued to engage with the investee banks since it and the Treasury gave evidence to the previous Environmental Audit Committee on 9 March 2010, holding discussions with the banks on their sustainability policies and participating in investor events to that effect.

10 February 2011