Climate labels could become mandatory following Treasury review of UK finance system
The results of a two-year review on how the financial system must change to support the net zero transition has called on the government to tackle greenwashing and consider climate labelling for financial products.
The Treasury Select Committee report was published as part of its decarbonisation and green finance inquiry: Net Zero and the Future of Green Finance. From this the Committee has made a series of recommendations for how the Government can achieve net-zero by 2050.
It recommends that financial products should be clearly labelled to allow consumers to assess their relative climate impacts and to make choices accordingly, and that HM Treasury and the Financial Conduct Authority (FCA) should consult on making such green labels mandatory, including how they could encourage innovation and be widely understood by retail consumers.
During its review, the Committee heard evidence on the issue of ‘greenwashing’ and how it can mislead consumers. It wants to ensure that the FCA has the appropriate remit, powers, and priorities to prevent this happening in future.
It also found that more could be done to accelerate and encourage take-up of innovative green finance products and services under the Government’s Green Finance Strategy. To achieve this, further FinTech challenges should be considered with the FCA setting out how it will tackle remaining regulatory barriers that discourage innovate green financial products from coming to market.
With the overall cost of achieving net zero uncertain, the review called on the government to set out the principles upon which the UK will fund its transition and set out its own cost assessments of achieving the target by 2050, including its methodology, and highlight where the uncertainties lie.
Commenting on the report, Rt Hon. Mel Stride MP, Chair of the Treasury Committee, said: “The Government, private finance, consumers, and regulators all have vital roles to play in helping the UK to achieve net-zero carbon emissions by 2050. The UK is a global leader in financial services. When the world’s eyes are on us for COP26, we must show that we can also be a green finance powerhouse to help achieve net-zero. We’ve made a series of recommendations to the Government and associated public bodies for how the UK can achieve its climate change commitments.”