Net Zero and the Future of Green Finance Contents

3The role of consumers

The importance of consumer choice

96.Consumer behavioural change, on a voluntary basis, will help to drive the transition to net zero, requiring both education and engagement. Consumer choice will be particularly important, so that people can make decisions that best suit their particular situation.

97.Community Energy England—which supports those committed to the community energy sector—told us that achieving net zero would require consumer ‘buy-in’, acknowledging that while “investment in Green Infrastructure and technology are vital, net zero cannot be ‘delivered’, only achieved with the consent and active participation of the people, not least because the Climate Change Committee estimates that 62% of all the measures it identifies as essential to achieving net zero are dependent on behaviour change”.141 In September 2020, the UK Parliament-sponsored Climate Assembly UK, which brought together people from all walks of life to discuss how the UK should meet the net zero target, published a report highlighting the importance of consumer choice in combating climate change, as it allows individuals to choose the best solution for them.142

98.The Treasury has also noted that interventions can make it easier for consumers to choose low-carbon options. In its Net Zero Review Interim Report, the Treasury states that:

Facilitative levers seek to change the structure of the market or the way people make decisions in order to make it easier for households and firms to choose low-carbon options. These levers can complement carbon pricing by addressing the other market failures that hold back the process of decarbonisation. This can lower the overall costs of the transition, change who pays and who is able to cover the necessary costs.143

99.We consider below three elements that may have an impact on consumer choices around green finance:

Consumer inertia and a lack of choice

Defined contribution pensions

100.Consumer choice can only work as a lever if consumers utilise the choices available to them. Yet within pensions, consumers may not have choices, or where they do, they may not use them. We heard evidence that 96% of pension savers144 in defined contribution145 pension schemes are invested in their pension’s ‘default’ fund.146

101.Huw Evans, Chief Executive of the Association of British Insurers, told us that one of the key challenges in relation to ‘default’ funds was that of low consumer financial capability and the need for clear explanations about the options available to consumers.147 Mr Evans hoped that part of the solution might come from fintech,148 through the “development of more consumer-facing apps and opportunities for customers to engage with how their pension funds are managed”.149

102.Mr Evans, however, also highlighted a potential policy barrier against offering sustainable funds as a ‘default’ fund option for auto-enrolled pensions:

The charge cap that we currently have in place for auto-enrol pension schemes is set at 0.75%. Nearly all ESG funds150 are above that because they involve active management, so they are more expensive to run. As long as you have a charge cap that does not allow for any exceptions, for example for ESG, you will find it hard to shift that. I would argue that there is a strong case in public policy terms for the charge cap having an exemption if there is an ESG component, to give people who are auto-enrolled in those funds to have the option to go above it.151

103.However, recent government announcements may mitigate this charge cap restriction to Environmental, Social, and Governance (‘ESG’) fund take-up in auto-enrolled pensions. In its Budget document Budget 2021, the Treasury noted that:

The government will consult within the next month on whether certain costs within the charge cap affect pension schemes’ ability to invest in a broader range of assets. This is to ensure pension schemes are not discouraged from such investments and are able to offer the highest possible returns for savers. DWP will also come forward with draft regulations to make it easier for schemes to take up such opportunities within the charge cap by smoothing certain performance fees over a multi-year period.152

104.Anthony Raymond, General Counsel and Director of Legal Services, Policy and Advisory Directorate at the Pensions Regulator, told us that transparency would be “really important” in tackling default fund inertia, noting that defined contribution schemes now had to publish a statement of investment principles. Mr Raymond considered though that in the case of a default fund in an occupational pension scheme153 “to effect real change in this space, it is about ensuring that the trustee is doing the right things and considering the right issues”.154 Sheldon Mills, then Interim Executive Director of Strategy and Competition at the Financial Conduct Authority, took a similar view:

… what we need to think about, […] is whether the right mechanisms are in place so that that demand filters through into the choice sets that people have in things like pensions, and whether the right products are available […] that can go into default funds, so that either the mechanism demonstrates through transparency to pension holders that there is something there for them, or you can have greater choice at the point of entry. We need to think more closely about that with trustees.155

105.Mr Mills also explained that the Financial Conduct Authority had already taken some action in requesting Independent Governance Committees156 for workplace personal pensions schemes to ensure that Environmental, Social, and Governance (ESG) considerations were included in their assessment of investment mandates.157 However, Mr Mills acknowledged that with the increasing demand for ESG-related investments, “there must be more that we can now start to do to match this increasing demand, but also filter into the overall challenge of net zero”.158

106.When asked about the high proportion of consumers in default funds, the Economic Secretary to the Treasury told us that:

… The pensions world is changing rapidly, and the Pensions Bill going through Parliament is going to make some progress, but the real challenge for the immediate term is to define what that green investment is and progress that at a wholesale and at a retail level, so that we can get more clarity on that. We will then make progress as the opportunities to invest a higher proportion in sustainable investments become clearer and more apparent.159

107.In a follow-up letter in December 2020, the Economic Secretary noted the interventions the Government had made in this area, and he told us that “whilst we welcome pension saver engagement and consumer choice, it should never be necessary to switch out of the default to invest sustainably”. However, he did not advocate mandatory targets, telling us that:

Mandatory climate targets would mean that pension scheme governance bodies would be in a position where they are forced to choose between making the right investment decision for their members and breaching legislation. The easiest way to protect themselves in this situation—and, under threat of penalty, the most likely action—is divestment. However, uncoordinated divestment will not help us reach our net zero goal, as the stock could be bought up by other investors and emissions will not be curbed. Pension scheme trustees and savers will remain exposed to the consequences of those high emissions whilst having less ability to hold the emitters to account.

Rather, the Government supports a whole economy transition, where duties land equally on all participants in the investment chain. Pension schemes and pension savers—many on low to moderate incomes—should not be singled out for blunt targets in an ineffective effort to fund the transition. This is a much less equitable outcome than the use of disclosure, regulation, and public investment which Government is already committed to.160

108.There is a high level of inertia amongst consumers around defined contribution pension fund choice, with most remaining in the ‘default’ fund. The Treasury has been robust in its view that default funds should not be required to move to more green alternatives, but at the same time maintains that consumers should not have to switch out of the default fund to invest sustainably. The Government should resolve this apparent contradiction. At present the Treasury is relying on a blend of disclosure, regulation and public investment to foster a transition towards more sustainable investment. For now, we support that approach, but the Treasury should report regularly on the proportion of pension holders in defined contribution pension schemes who remain in the default fund, and the extent to which those default funds are aligned with a path to Net Zero.

Requirements on workplace pension scheme trustees

109.Consumers with Defined Benefit pensions are unable to choose how their assets are invested, creating an absence of consumer choice as a driver of change. They are therefore reliant on the pension scheme trustees to consider material climate-related financial risks, and to invest sustainably.

110.The Pension Schemes Act 2021161 (‘the Act’) is intended to support the Government’s expectation, set out in the Green Finance Strategy, that all large asset owners will make disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) by 2022.162 Section 124 of the Act amends the Pensions Act 1995 so as to provide for regulations which “may impose requirements on the trustees or managers of an occupational pension scheme of a prescribed description with a view to securing that there is effective governance of the scheme with respect to the effects of climate change”.163

111.In September 2020, Anthony Raymond, General Counsel and Director of Legal Services, Policy and Advisory Directorate at the Pensions Regulator, told us that the Act would make a real difference, as the TCFD requirements would be put on a statutory footing. He noted that the Act would also include regulation-making powers which would be an area of focus for the regulator.164

112.We note that the UK Sustainable Investment and Finance Association (UKSIF) found large-scale non-compliance among trustees with the previous regulatory expectations on Environmental, Social, and Governance (ESG) considerations set by the Pensions Regulator.165 Although Mr Raymond told us that of the schemes reviewed by UKSIF “only nine of the 45 schemes were within the purview of the legislation at that point”,166 he acknowledged that the Pensions Regulator needed to be clear with the industry and engage with them. However, Mr Raymond also noted that supervisors had been trained on “the sorts of things they need to be looking out for when they are engaging with schemes, and where necessary, enforcement”.167

113.Mr Raymond explained that although the governance of larger pension schemes tended to be better, and were better equipped to deal with ESG issues, “we have systemic issues across the pensions landscape in terms of large numbers of small DC [Defined Contribution] schemes […] over 30,000, with 6,000 or so DB [Defined Benefit] schemes”.168

114.The Department of Work and Pensions first consulted on ‘Taking action on climate risk: improving governance: improving governance and reporting by occupational pension schemes’ in August 2020.169 In its follow-on consultation in early 2021, on the new regulations to be made under the Pension Schemes Act 2021, the Government confirmed that primarily larger pension schemes would initially be subject to mandatory climate change governance and TCFD reporting requirements:

(a) trust schemes with £1 billion or more in relevant assets

(b) authorised master trusts; and

(c) authorised schemes providing collective money purchase benefits.170

115.The Government acknowledges that industry responses to the first consultation most commonly “suggested that the asset threshold should move down rapidly to below £1bn” and that a significant number of respondents suggested that “smaller schemes might be encouraged to implement the climate governance requirements voluntarily in the first instance, or perhaps on a comply or explain basis.”171

116.The Government has confirmed that it will consult again in 2024 before deciding whether to extend the regulations to pension schemes with less than £1 billion in assets.172 However, in the interim this will leave smaller pension schemes outside the scope of the regulations and these pension savers outside the trustee obligations envisaged by the Pension Schemes Act 2021.

117.Consumers who hold defined benefits pensions have no choice as to how their assets are allocated. They rely upon their trustees. We note that previous attempts to get defined benefit schemes to acknowledge Environmental Social and Governance concerns have not been entirely successful. In its phased approach to implementing the regulations, the Pensions Regulator will need to consider how to reach smaller pension schemes. The draft regulations appear to exclude the smallest trust schemes. However, when their effects are aggregated, they may still have an impact on meeting the net zero target. In responding to this Report, the Government should set out how these smaller funds will be encouraged to integrate climate governance and reporting requirements.

Appropriate transparency for consumers and ‘Greenwashing’

Greenwashing

118.For consumers to make effective choices they will need clear information to be able to do so, and such information will need to be appropriate for all consumers. In its Net Zero Review: Interim Report, the Treasury observed that:

Measures to improve information about low-carbon choices can help drive consumer and producers towards alternative products. Examples include information and educational campaigns; government advice centres and online support services; and mandating improved labelling to help drive consumer and producer choices towards low-carbon alternatives. They usually come at low fiscal costs and can increase businesses’ accountability to consumers for their emissions. However, they can come with high compliance costs for businesses.173

119.However, we heard evidence that ‘greenwashing’—where products or funds are labelled as ‘green’ or sustainable but may not be so—may be an issue, with the potential to mislead consumers and cause capital misallocation.

120.The industry itself appeared aware of the danger that ‘greenwashing’ presented. Chris Cummings, representing the Investment Association, told us that:

From that reputational point of view, ours is an industry that takes its responsibilities incredibly seriously on this. We understand completely the dangers of being accused of greenwashing. Part of the challenge is finding investible projects, investible companies, that have a good story to tell and are committed to transitioning. The danger we are all aware of is greenwashing: finding something that looks a bit green and promoting it as a green success story. That undermines everything we are trying to achieve.174

121.Dr Daniel Klier, Group Head of Sustainable Finance at HSBC, outlined the dangers that ‘greenwashing’ may pose. He drew our attention to an annual investor survey that suggested that 80% of respondents considered that lack of disclosure and consistent definitions held back further investment into sustainability and the energy transition.175 Professor Nick Robins, Professor in Practice of Sustainable Finance, Grantham Research Institute at the London School of Economics, agreed that data would allow investors to distinguish between assets and understand “which investments and assets are aligned to the transition”176 to net zero.

122.However, Saker Nusseibeh, Chief Executive Officer of Federated Hermes International,177 took a more optimistic view of what ‘greenwashing’ might represent and told us that:

… greenwashing is at least an acknowledgement by the industry that it is important, that society thinks it is important, and that the regulator thinks it is important to reduce carbon footprint. That must be a first step. The second step is to have the taxonomy and the regulation to winnow away the truth from that which is less true.178

123.When asked about the importance of greenwashing, Sheldon Mills, Interim Executive Director of Strategy and Competition at the FCA, replied:

We do focus on greenwashing, quite a lot from the consumer perspective, in terms of what is being delivered to consumers and the types of products or funds they are investing in. There are two ways we interact with either funds or products within our system. One is through our authorisations work. If a fund is being authorised with us and it pertains to be an ESG-related fund, we will look at that to see whether that is going to be clear, fair or misleading. Is it what it says on the tin? We have seen instances where what the fund says it is investing in does not really stack up with it being ESG.179

However, he also noted the limits of the FCA’s remit:

In one sense, it is absolutely apposite to say that, if ESG is so broad that funds go into things like greening fossil fuel companies a little bit, we might not necessarily meet some of the goals, if the funds are not going into new and innovative businesses that are really driving change in relation to those goals. That is not entirely our role. Our role is, in a sense, to look to make sure that the fund does what it says on the tin, and that has been our focus.180

124.The financial services industry broadly accepts that ‘greenwashing’ is detrimental to good consumer outcomes and to the achievement of the net zero goal. The Treasury must work with the FCA to ensure that the regulator has the appropriate remit, powers and priorities, and uses its powers, to prevent ‘greenwashing’ of financial products available to consumers.

125.We consider later in this Report, at paragraph 184, what steps might be taken to implement a UK ‘green’ taxonomy, which could help to give more assurance that financial products which are marketed as “green” are indeed contributing to the transition to net zero.

Climate risk labels

126.In line with the potential for mandating improved labelling cited by Treasury in its Net Zero Interim Review “…to help drive consumer and producer choices towards low-carbon alternatives”,181 Huw Evans, Director General of the Association of British Insurers, told us that “if we are talking about retail investors as opposed to institutional investors, we have to have a very straightforward set of explanations that do not mislead and that enable those customers to fully understand the potential risks as well as the potential rewards, to go alongside their motivation.”182

127.Some firms are already providing carbon labels on their products. Sandra Boss, Global Head of Investment Stewardship at BlackRock told us that:

“[…], all our EMEA183 funds are now labelled with their carbon intensity. That is something we are doing worldwide. We are really trying to help people see the sustainability content of the product they are buying. That will help as well. Hopefully, ultimately, they will also get those long-term savings goals.”184

128.In February 2020, Andrew Bailey, then Chief Executive of the Financial Conduct Authority, told us that a ‘visual rating system’ to disclose the carbon footprint of financial products could be considered, but he believed that a “comprehensive approach would currently be challenging”. He identified data and methodological limitations, such as difficulties in sourcing appropriate data inputs; insufficient and inconsistent issuer-level disclosure; and the lack of an agreed set of standards, metrics and criteria for defining sustainable activities. Mr Bailey then referred to other product label initiatives, including the EU’s development of an ‘eco label’, and UK industry plans by the Investment Association and the British Standards Institution to consider product labels.185

129.We asked the Economic Secretary to the Treasury, John Glen MP, whether labelling of funds or indices should distinguish between ‘green’ funds investing only in renewables and those focused on transition finance which could include polluting companies. He responded that “To what extent signposting and labelling of funds would need to be adjusted is a technical matter and you would need to look very carefully at what industry says”.186

130.Financial products should be clearly labelled to allow consumers to assess the relative climate impacts of products and to make choices accordingly. However, allowing every firm to create its own consumer sustainability labels may lead to inconsistencies and consumer confusion. The Treasury and the Financial Conduct Authority should consult on the merits of making climate or carbon labels for consumer financial products mandatory, as a means to encourage innovation. The FCA should consult on how best to make such labels readily and widely understood.

Passive investments and indices

131.Indices, such as the FTSE 100, are an important part of the investment landscape. They sit at the heart of passive tracker funds (in which investments simply track an index), which have risen in popularity.187 However, we heard two concerns related to indices in terms of green finance, and which reflect the concerns already discussed in this report around consumer choice. They are that:

132.On the importance of indices, the previous Committee heard evidence from Simon Howard, Chief Executive of the UK Sustainable Investment and Finance Association, in which he explained that this was also an issue for pension funds as most “will benchmark their fund manager’s performance against a benchmark index, so indices are vitally important”.189

133.In December 2019, the Guardian reported that the FTSE4Good indices, designed as sustainable investment indices with clearly defined ESG criteria, had added oil companies including Rosneft Oil and ConocoPhillips (13th and 15th largest oil companies by market capitalisation) to the FTSE4Good index. The Guardian noted that the public factsheets showed that 65 oil and gas companies were present on FTSE4Good’s emerging and developed markets indices.190

134.Rachel Haworth, UK Policy Manager at ShareAction, a charity promoting responsible investment, told the previous Committee that:

We need to ensure that we are promoting fossil fuel free indices. They need to be mainstreamed. They need to be the default option, because otherwise, as long as we have these kinds of small technical issues that completely change the way markets are functioning, nothing is going to change substantially.191

135.We put to Sheldon Mills, Executive Director of Competition and Consumers at the Financial Conduct Authority, concerns around investment indices, and in particular the FTSE4Good index. He replied:

We do not have significant concerns, other than that from a general viewpoint we would expect the indices to seek to ensure that they are transparent as to what is on them. I cannot speak to that specific index, but there should be a level of transparency so that people can take the right choice based on the information available to them.192

136.On whether indices should be clearly marked, the Economic Secretary to the Treasury, while noting the role of transparency and the education of finance professionals, told us that:

The Benchmarks Regulation (the regulation governing investment fund indices) includes disclosure requirements concerning how benchmark administrators take into account Environmental, Social and Governance factors. In 2019, two new categories of “climate-related benchmarks” were also introduced under the Benchmarks Regulation. “Climate Transition Benchmarks” (CTBs) must be constructed so that the underlying assets are on a decarbonisation trajectory, while “Paris-Aligned Benchmarks” (PABs) must be constructed so that the underlying assets are aligned with the objectives of the Paris Climate Agreement. Together, these standards will enhance the transparency and comparability of “low carbon” benchmarks to enable investors to make more informed decisions.193

137.We note the concerns expressed about indices, in that the most popular may be carbon-intensive, and those that purport to be green may have carbon-intensive constituents. The risk remains that many consumers are unaware of the carbon-intensity of the indices that their passive investments are tracking. The Treasury and regulators should therefore ensure that all indices (whether conventional or climate-friendly) clearly set out the overall carbon footprint of the assets included within indices.

138.On the concerns around the constituents of indices described as ‘green’, we note the requirements under the Benchmarks Regulation, which should be used to help consumers make better choices. However, it is clear that in some cases the labels or descriptions of ‘green’ or ‘climate-related’ indices do not necessarily match legitimate consumer expectations of what they would commonly be understood to mean. The Treasury and FCA should review the provisions in the legislative and regulatory framework and ensure that the labels and descriptions of indices accurately reflect their content, in line with consumer expectations.

Green product innovation

139.One of the ways consumer choice might be improved within Green Finance may be through innovation. One of the aims set out by the Government for its Green Finance Strategy was to “position the UK at the forefront of green financial innovation and data and analytics”. It would do this by “creat[ing] an environment that catalyses UK innovation in green finance products and services, including data and analytics, in collaboration with regulators, industry, and academia”.194

140.The Green Finance Strategy also provided the following description of the UK’s record in this area:

The UK has a strong record in green financial innovation ranging from Yieldcos, green bonds and environmental, social and governance (ESG) Exchange Traded Funds listed on the London Stock Exchange Group to green mortgages and retail investment platforms.195

141.In July 2019, the Government implemented a key recommendation of the Green Finance Taskforce and launched the Green Finance Institute (GFI). Envisaged as the “UK’s principal forum for collaboration between the public and private sector with respect to green finance”, it is intended to form an integral part in delivering the Government’s Green Finance Strategy.196 The GFI states that it works with policymakers, industry and academics, and that “in convening and leading action-focused coalitions, we foster the design and promote the launch of innovative financial mechanisms that create commercial revenue opportunities”.197

142.The Government has shown recent innovation, in announcing at Budget 2021 that the Government will offer a green retail National Savings & Investment product in the summer of 2021. The product will “give all UK savers the opportunity to take part in the collective effort to tackle climate change […]”.198

143.Dr Daniel Klier, Group Head of Sustainable Finance at HSBC, provided this description of when public money should be used to stimulate innovation:

The place where public money is needed is in technologies that are not yet ready for market. Wind is a very good example where the UK was a world leader by creating a framework that made the technology market ready and then it was time to withdraw any subsidies.

If we think about the long list of technologies—hydrogen and electric vehicles, and at some point we can talk about lowemission aviation and the like—those are technologies where public money is needed to bring them to the place where they are commercially viable. At the moment, private money does not flow, unless you are an extraordinary risk taker who seeks an extraordinary return at the end. Those are the technologies where public money is needed, and the public also needs to be educated enough to withdraw subsidies at the point when it is ready for commercial application.199

144.Bruce Davis, Chief Executive Officer of Abundance Energy,200 told the previous Committee that it had taken his company two years to become authorised by the Financial Services Authority [predecessor to the Financial Conduct Authority] and that green finance innovation was difficult. Mr Davis explained that this was because “It is long term, it requires understanding of assets […] We are not seeing the credit knowledge and expertise spread as widely as it could be, to bring down the costs of capital and speed the flow.”201

145.Mr Davis also noted that although Barclays’ green mortgage product had retrospectively shown “that people who make that decision are a better credit risk”,202 this knowledge had not been developed to create a “green Experian [Credit Reference Agency]”.203 Mr Davis similarly noted that residential retrofits (such as installing solar panels or insulation) did not yet signal a higher market value on the housing market and “do not provide the sort of returns that you can get from […] a kitchen refurbishment”.204

146.In relation to insurance, Huw Evans, Chief Executive Officer of the Association of British Insurers, told us that the industry was beginning to make more use of ‘resilient repair’, in which homes in high flood risk areas are repaired in a way that is resilient to future flood incidents, and suggested that “use of apps, greater knowledge, and more specific data modelling about incidents of flooding”205 would enable customers to buy products that were more responsive to their flood risk.

147.The pace of innovation still appeared laggardly to some who gave evidence. Legal and General told us that “green financial products for retail customers (eg mortgages, though we have recently launched an equity release product with additional cashback for green housing modifications) have not developed quickly enough.”206 Barclays, when considering business investment, noted that:

There are already a number of green products available in the marketplace that are contributing to the net zero goal, including ‘use of proceeds’ loans which are relatively easy to identify (e.g. for Wind, Solar etc.). However, more needs to be done in the corporate space, where an appropriate incentive structure is required to encourage small, medium and large corporates to select projects that will advance net zero (e.g. opting for electric vehicles or sustainable supply chains, or focusing on the reduction of emissions).207

148.In its October 2018 Discussion Paper Climate Change and Green Finance, the FCA noted that “the FCA has a clear role to ensure markets for green finance are open to new entrants and innovation, enabling successful firms to thrive and deliver better outcomes for consumers.”208 Sheldon Mills, Interim Executive Director of Strategy and Competition at the Financial Conduct Authority, told us that:

To excite consumers you need exciting products. If you want to excite the youth, you need apps that tell you how your investments might relate to ESG, et cetera. We, in 2019, had our green fintech challenge. We selected nine products. Some of them have even gone to market, which is fantastic. We are encouraging innovation to come in through the door, and working through how we can remove regulatory barriers, so we can have ESG-related financial services products growing up.209

149.The Government’s Green Finance Strategy noted the need for innovation in green finance products and services, yet the evidence we have received suggests that the pace of innovation could be accelerated and that more could be done to encourage take-up. The Financial Conduct Authority should seriously consider undertaking further “green fintech challenges” to encourage innovation. The regulator should also set out how it will tackle remaining regulatory barriers which discourage innovative ‘green’ financial products from coming to market. The Government and the regulators should work more closely with the Green Finance Institute to bring innovative ideas which will benefit consumers to the market.

141 Community Energy England (DEC0091) para. 2.5

142 Climate Assembly UK, The path to Net Zero - Climate Assembly UK Final Report, (September 2020), p.6

143 HM Treasury, Net Zero Review: Interim report, December 2020, p 49, para 4.15

145 Defined contribution pension scheme definition: “Defined contribution pensions build up a pension pot using your contributions and your employers contributions (if applicable) plus investment returns and tax relief”, Money Advice Service, accessed 15 February 2021

146 “A ‘default’ fund is the fund that members see their contributions invested in should they fail to make an alternative investment choice”, Default fund design in DC, accessed on 15 February 2021

148 “Fintech” or Financial Technology is defined by the Bank of England as “technology-enabled financial innovation, which is changing the way financial institutions provide - and consumers and businesses use - financial services”.

150 Environmental, Social and Governance (‘ESG’) funds are defined by Robeco as: “portfolios of equities and/or bonds for which environmental, social and governance factors have been integrated into the investment process”, accessed 15 February 2021

152 HM Treasury, Budget 2021, HC 1266, March 2021, para 2.147, p 64

153 Occupational pension scheme definition: “Workplace pension schemes or workplace pensions are pension schemes that are set up by employers to provide their employees with retirement benefits”, Pensions Advisory Service, accessed 15 February 2021

156 Independent Governance Committee definition: Financial Conduct Authority rules “require that firms that operate workplace personal pensions schemes to establish and maintain Independent Governance Committees (IGCs). IGCs have a duty to scrutinise the value for money of the provider’s workplace personal pension schemes, taking into account transaction costs, raising concerns and making recommendations to the provider’s board as appropriate. IGCs must act solely in the interests of relevant scheme members; act independently of the provider.”, Financial Conduct Authority, accessed 15 February 2021

160 HM Treasury, Letter to the Chair of the Treasury Committee from the Economic Secretary, Decarbonisation of the UK economy and green finance inquiry, 16 December 2020, paras 11 - 13

161 Pension Schemes Act 2021 received Royal Assent on 11 February 2021

162 Explanatory Notes to the Pension Schemes Bill [HL], 16 July 2020 [Bill 165 (2020)-EN], para 29

163 Pension Schemes Act 2021, Section 124(2)

165 Q134; UK Sustainable Investment and Finance Association, ‘Changing course: how pension trustees are responding to climate change and ESG’, accessed 15 February 2021

169 Department for Work and Pensions, ‘Taking action on climate risk: improving governance and reporting by occupational pension schemes’, accessed 11 April 2021

173 HM Treasury, Net Zero Review: Interim Report, December 2020, p 50, para 4.15

177 Federated Hermes International is an asset manager

181 HM Government, Net Zero Review Interim Report, December 2020, para. 4.15

183 Europe, Middle East, and Africa (EMEA)

185 Financial Conduct Authority, Letter from CEO of FCA to Chair regarding Climate Risk, 24 February 2020, p 3

188FTSE trackers expose investors to ‘stranded assets’, Citywire, 1 November 2016,

189 Oral evidence taken on 8 October 2019, HC (2017–19) 2233, Q91 [Mr Baker, Simon Howard]

191 Oral evidence taken on 8 October 2019, HC (2017–19) 2233, Q93 [Mr Baker, Rachel Haworth]

194 HM Treasury and Department for Business, Energy & Industrial Strategy, Green finance strategy; Transforming Finance for a Greener Future, July 2019, pp 10, 55

195 HM Treasury and Department for Business, Energy & Industrial Strategy, Green finance strategy; Transforming Finance for a Greener Future, July 2019, p 10

196 Department for Business, Energy & Industrial Strategy, ‘Guidance Green finance Transition to a green financial system and mobilising investment in clean and resilient growth’, accessed 18 March 2021

197 Green Finance Institute, ‘Our work’, accessed 18 March 2021

198 HM Treasury, Budget 2021, HC 1226, March 2021, para 2.145

200 Abundance Energy is an investment platform facilitating investments in sustainable projects

201 Oral evidence taken on 8 October 2019, HC (2017–19) 2233, Q85 [Mr Streeting, Bruce Davis]

202 Oral evidence taken on 8 October 2019, HC (2017–19) 2233, Q85 [Mr Streeting, Bruce Davis]

203 Oral evidence taken on 8 October 2019, HC (2017–19) 2233, Q85, [Mr Streeting, Bruce Davis]

204 Oral evidence taken on 8 October 2019, HC (2017–19) 2233, Q85, [Mr Streeting, Bruce Davis]

206 Legal and General (DEC0120) p 5

207 Barclays (DEC0052) p 2

208 Financial Conduct Authority, Climate Change and Green Finance Discussion Paper DP18/8, (October 2018), p9, para 4.4




Published: 22 April 2021