Momentum has gradually built over time, with the 2015 United Nations climate-change summit in Paris (COP21) seeing the first-ever agreement under which virtually every country, including the UK, pledged to constrain their greenhouse gas emissions, with the aim of keeping global warming well below two degrees Celsius. In 2018, the UK Government issued its 25 Year Environment Plan and laid down legislation to reach net-zero carbon emissions by 2050. It followed this up with its Green Finance Strategy in July 2019, which recognised the crucial role of the financial services sector in delivering global climate and environmental objectives.
In the same month, the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), The Pensions Regulator (TPR) and Financial Reporting Council (FRC) published a Joint Declaration welcoming the Government's Green Finance Strategy and setting out their shared understanding of the financial risks and opportunities of climate change. Since then, they have each have taken a number of significant actions in respect of climate change.
These developments highlight why now, more than ever - and particularly as we look towards a sustainable recovery from COVID-19 - it is important for firms to take stock and assess their position across a number of regulatory focus areas.
In the following summary report, Sushil Kuner from Gowling WLG's Financial Services Regulatory team explains why climate change is an important issue for regulators, financial services firms and the consumers they serve and explores the key developments in this area.
Areas covered in this summary include:
- Why is climate change important for financial services?
- PRA focus - financial resilience and market stability for the banking and insurance sectors
- FCA focus - climate change risk disclosures, impact on pension providers and enhancing competition and market growth for green finance
- FRC focus - stewardship and climate change reporting
- TPR focus - investment guidance for pension trustees
- Conclusions and next steps
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