The seven-week inquiry will assess the potential impact of decarbonization on the UK economy, and examine opportunities for the growth of green finance.

By Paul A. Davies and Michael D. Green

On World Environment Day, June 5, 2019, the UK Treasury Committee (the Committee) launched an inquiry into the decarbonization of the UK economy and green finance. The inquiry will scrutinize the role of HM Treasury (HMT), regulators, and financial services firms in supporting the UK government’s climate change commitments, and examine the potential for decarbonizing the UK economy.

UK Treasury Committee

The Committee was established by the House of Commons (the House) to examine the expenditure, administration, and policy of HMT, HM Revenue & Customs, and associated public bodies such as the Bank of England and the Financial Conduct Authority. The Committee is free to choose its own subjects of inquiry, which may lead to a report to the House, or a single day’s oral evidence.

Committee membership reaches across the House benches, and is currently comprised of 11 members. Five members are drawn from the Conservative Party, five from the Labour Party, and one from the Scottish National Party. Recent reports have examined topics such as consumers’ access to financial services, anti-money laundering supervision, and appointment of persons to public office.

Strands of the Decarbonization and Green Finance Inquiry

The Terms of Reference have been published on Parliament.uk, and detail three strands of inquiry:

  1. The economic opportunity for the UK
  2. HMT’s strategy
  3. Green finance

The Committee’s first strand — the economic opportunity for the UK — will examine:

  • The economic costs and benefits presented by decarbonization
  • The benefits that growing the green finance sector can deliver
  • How the UK can hold a competitive advantage in the green finance sector
  • How HMT can deliver a regionally balanced and “just” transition across the UK

The Committee’s second strand — HMT’s strategy — will examine:

  • HMT’s current decarbonization strategy and its fitness for purpose
  • How the Clean Growth Strategy can support decarbonization
  • How HMT’s approach should evolve to ensure the UK government meets legally binding carbon budgets
  • What role the 2019 Comprehensive Spending Review should play in UK decarbonization

The Committee’s third strand — green finance — will examine:

  • The role of UK financial services in decarbonization
  • Steps banks, asset managers, pension funds, the Financial Conduct Authority, and the Prudential Regulation Authority have taken to “green” their business models
  • Prudential risks posed by climate change; consumer demand for and accessibility of ‘green’ financial products
  • Obligations upon listed companies to report carbon emissions

Submissions Deadline

The inquiry will be open for submissions until July 26, 2019. The seven-week inquiry will provide recommendations for meeting the UK net-zero by 2050 target, discussed in this prior Latham post. The first oral hearing is scheduled for July 2, 2019.

The Committee Chair, Rt Hon. Nicky Morgan MP, stated that while “decarbonizing the UK economy presents significant challenges, it also provides an opportunity for the financial services sector to unlock its green potential.”

Latham & Watkins will continue to monitor developments in this area.

This post was prepared with the assistance of Martin Cassidy in the London office of Latham & Watkins.