Financial Services and Markets Bill

Baroness Young of Old Scone Excerpts

Report stage
Tuesday 6th June 2023 Lords Chamber

[Baroness Young of Old Scone (Lab)]

My Lords, I support Amendment 15 in the name of the noble Baroness, Lady Hayman, who introduced it very powerfully. I want to talk to the House about the real relationship between nature conservation and climate change and the need to bring those together in the regulatory process. Nature restoration is essential for our reaching of net zero—we cannot do net zero without restoring nature; I think that is globally accepted now—but nature restoration is important to economic prosperity in several other ways. More than half of global GDP is considered moderately or highly dependent on natural assets and half the world’s population is completely dependent on biodiversity for their livelihoods. That means that biodiversity is as important as climate change.

Biodiversity is also highly material in assessing risk, including financial and economic risk, and it is pretty clear that if biodiversity is going down the tubes, so is the economy and, indeed, so are we. So, it is a bit of a no-brainer, in my view, that financial services regulators should have, as a regulatory principle, net zero and nature recovery together: the two are absolutely indissolubly linked. I hope the Minister will not say that the provisions that are in the Bill for net zero will act as a proxy for biodiversity restoration. It does not work that way: net zero is a necessary condition but not a sufficient condition for biodiversity recovery.

The noble Baroness, Lady Hayman, threatened the House with simply reading out all the commitments that have already been made that are encapsulated in her Amendment 15. I want to add another one that no one has mentioned so far. The Environmental Audit Committee, in its report on biodiversity in June 2021, highlighted the fact that, although some progress had been made in transforming the financial system to reflect the pressures of climate change, the whole accompanying handshake with biodiversity was way down the line and much slower and needed to accelerate. It called on the Government to play a part in creating a narrative that there is a lot of international commitment to biodiversity recovery linked with climate change that we are going to have to respond to in this country, because we have signed up to it globally, and that it is therefore important to get the financial services industry and its regulation up to speed soon in order to cope with that global pressure. The noble Baroness’s Amendment 15 would do that and, more importantly, it would secure this through a legislative approach and not be overly reliant on voluntary action.

Without delaying the House any longer, I also support Amendment 91 on deforestation. I will not repeat what the noble Baroness, Lady Boycott, said, but it was the bee’s knees. I end with a note of distress at the comments made by the noble Lords, Lord Davies and Lord Naseby, about pension scheme investments and investors and pension committees and pension advisers’ responsibility and duty to pensioners. I declare an interest, having set up the Environment Agency pension scheme some 25 years ago to be, at that stage, the only really green pension scheme and now probably the foremost green pension scheme in the world.

Let us not be in any doubt: there is not a dichotomy about responsibility to pensioners and taking action on climate change and biodiversity. They are absolutely one and the same thing. If climate change and biodiversity decline continue, there will be irreparable harm to the economics that pensioners and pension schemes depend on. Let us not be in any doubt about that: pension scheme trustees and their advisers—and I hope, if the Minister will accept Amendment 15, their regulators—have a responsibility towards climate change and biodiversity recovery, because it is absolutely in the economic interests of their beneficiaries.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise very briefly to express Green support for the non- government amendments in this group and acknowledge the way in which the weakness of the government amendment has already been acknowledged. Noble Lords will note that the explicitly environmental amendments, from Amendment 15 onwards, do not have a Green name on them. I am delighted about that because there was not space for one, because the amendments have cross-party support from right across the House, which really shows how far we have come in these debates.

I shall make four brief points, because I am very aware of the time. They are building on the points just made by the noble Baroness, Lady Young, and reflecting on an article published last week in Nature, which demonstrated that in seven of eight key measures, including climate, biodiversity and water, we are outside the safe and just operating space of this planet. We are absolutely at crisis point and I pick up the point made by the noble Baroness, Lady Hayman, that we cannot afford to wait. We cannot wait for the next Bill, the Bill after that and the Bill after that. I very much agree with the point just made by the noble Lord, Lord Vaux, that the country should not have to wait for the House of Lords to insert these things into Bills; they should be there in government Bills as a matter of absolute, basic course.

I have a particular point about Amendments 93 and 113, which strengthen the fiduciary duty of pension funds to ensure investors consider the impact of their investments on environment and society. The case has already been made that there is no finance on a dead planet and there are no pensions on a dead planet, but the society element also deserves to be noted. We have had a huge amount of discussion of the problem of the large number of people of apparently working age who are not engaged in our labour force at the moment, and the public health crisis that is associated with that. It is the kind of thing that Green councillors have been going on about, as members of governing boards of pension funds for years: such things as tobacco and the kinds of food products that are being supported are all issues that have an impact on pension returns.

On deforestation, the noble Baronesses, Lady Meacher and Lady Boycott, among others, have already made points about this, but there is £300 billion of UK pension money in high deforestation risk companies and financial institutions—that is a figure from Make My Money Matter. Again, there is a point about risk. The financial sector in the UK faces up to £200 billion of risk in Brazilian beef and soya and Indonesian palm oil supplies alone.

Finally, there is another risk in terms of our international reputation. We are of course enthusiastic signatories of the global biodiversity framework, which promises, under target 14, that the UK will align

“all relevant public and private activities, [fiscal] and financial flows with the goals and targets of this framework”.

How could the Government not be accepting all the amendments in this group?

Financial Services and Markets Bill

Baroness Young of Old Scone Excerpts

Committee stage
Monday 30th January 2023 Grand Committee

That is why I support these amendments. It is important that the net-zero aspects are not given a lower billing than growth and competitiveness. That would send the wrong message. Just “having regard” to net zero is not enough. As I have said, I do not believe there is any real conflict—quite the opposite, if done well. Good financial regulation in this area should help the UK become a global leader in the exciting technologies and businesses of the future, driving both growth and competition, so I urge the Government to accept them.

[Baroness Young of Old Scone (Lab)]

My Lords, I very much enjoyed what was just said by my fellow countryman. I will talk to Amendment 69 in the name of the noble Baroness, Lady Sheehan, which I have also put my name to. The amendment adds nature to the new regulatory principle on net-zero emissions. I also recognise everything that the noble Baroness, Lady Hayman, said about needing an objective rather than a regulatory principle. However, if we are to be stuck with a regulatory principle, it needs to address the twin existential crises we are facing globally and as a nation: climate and nature decline.

I must confess that I was kind of taken aback by the two previous speakers. The fact that climate and nature are such major things and go hand in hand, with one not being able to be resolved without the other, is now so commonly recognised globally by the business and financial communities and by Governments that I felt there was a whiff of quill pen coming from the other side, which is most distressing. The reality is that our financial institutions have a key role in enabling the financing of decarbonisation of the economy but also in promoting nature-based solutions. It is partly about making sure that the natural environment is lending its full hand to solving the climate change crisis, because we need every lever in the kit—every tool in the toolbox—to step up to that challenge. The financial institutions have a key role in that.

However, we also already have government commitments on the natural environment in this country: the Environment Act targets. That was the first time we have had statutory nature conservation targets in this country, which the Environment Act introduced and which become binding on government at midnight tomorrow night. We have to recognise that, if we have big bucks that are directed by the financial institutions and by investment, they absolutely have to tackle both climate change and nature conservation.

We should not look at this as a sort of dead-weight cost on the regulatory process or the financial markets because these investments in nature and climate are vital for our future economic growth. They are the heartland of our future economic growth; the jobs of the future are green jobs. We are behind the curve at the moment; the director-general of the CBI and others are all commenting that we are falling behind and losing our international competitiveness because we are not being vigorous enough in getting investment streams into climate change and nature. So we need the regulators to drive green growth and green investment really hard, for both net zero and nature recovery, to give businesses the confidence to invest.

These are very big bucks: the director-general of the CBI was absolutely clear that, in the past two years, the UK has lost its market share in green tech, which is equivalent to a potential value of £4.3 billion by 2030. Globally, an estimated $32 trillion of investment is needed by 2030 just to tackle climate change. So we are talking about big bucks, big investment, big jobs, big economy and big growth, and we were on it until a very small number of years ago. We have to get back on it to be able to hold our heads up in the international economic community.

So I hope that some of the things I have heard tonight are not government policy and that the Government are still absolutely clear about their commitment to action on the twin crises to turn them into opportunities. So, if the amendment moved by the noble Baroness, Lady Hayman, on regulatory objectives is not adopted, I ask the Minister at least to ensure that the regulatory principles reflect that commitment.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I had not intended to speak on this subject, but I very much agree with everything that has been said, especially by the noble Baroness, Lady Young, just now, about the lost opportunity if we do not take climate change and embedding it in financial services seriously. ESG investing is the big growth area at the moment, and what message are we giving if we say, “Well, we’re not really that interested in the ‘E’”? I am not sure about the “S” and the “G” either. We will potentially lose out.

It is not as if this will be an environmental tax on every business, or as if it has to be woven into every last little bit of financial services, like some chain round their neck. I spend some time looking at the general duties of the regulators, and, if I were to say anything about the positioning of this, I would say that it is not necessarily high enough up in the hierarchy because it is entirely forgettable within the layering that we have. I object to the notion that we are still in an era where we can do damage and compensate; you cannot compensate for a ruined planet. That is very much old thinking. It is almost centuries old in my book.

The FCA’s general duties state:

“In discharging its general functions, the FCA must, so far as is reasonably possible, act in a way which … is compatible with its strategic objective and … advances one or more of its operational objectives.”


What we are talking about here is a secondary operational objective, but the whole thing could be forgotten. If you ask me, it should be in the strategic objective, which is the only thing that cannot be rubbed out, because that is where we are at. We can go through this lovely list. Integrity gets rubbed out when it comes to SMEs—we have been through that debate—so climate things will be rubbed out if you want to be one of the rough-and-tumble financial firms that wants to deal with gas and oil exploration. Money is needed for that to work it all through and make sure that there are no stranded assets.

What is the big problem with what I would call a measly secondary objective? I understand the competitiveness and growth objective, which seems to be liberally sprinkled throughout to try to give it some kind of priority, but you have to balance that with sustainability in its broadest sense. All these things are about balance. We cannot have a Climate Change Act that says we will do things and then just ignore it in our biggest industry. It is the biggest case out there and we need something on it here. I will look at this again on Report and the Minister jolly well knows where I will put it.

Infrastructure Bill [HL]

Baroness Young of Old Scone Excerpts

Monday 10th November 2014 Lords Chamber

[Lord Jenkin of Roding]

My Lords I understand the case that has been made by the noble Baroness, Lady Worthington. I started my consideration of the details of this with the hugely important joint report of the Royal Society and the Royal Academy of Engineering back in June 2012. Indeed, I had substantial discussions with the chairman of the committee that produced the report, Sir Robert Mair, whom I had known previously. Perhaps the most important statement in that report—and it had a great deal of detail backing it up—was that they had reviewed the scientific and engineering evidence on risks associated with UK shale gas development and concluded that those risks,

“can be managed effectively in the UK as long as operational best practices are implemented and enforced through regulation”.

That has been at the heart of my continuing support for the development of the shale gas industry in this country.

My second point—and no doubt my noble friend will be able to elaborate on this—is that the regulation system that we have in this country, in general under the authority of the Environment Agency, is quite different from that in the United States. I am in no doubt that some of the regulation there has been quite seriously defective. That has given rise to accidents that have been reported, and to the lack of support that one is aware of here and that the noble Baroness has referred to. Of course, you only have to read the media to realise that every accident that happens there is greatly magnified through the media—with a trumpet, as it were. If noble Lords studied the various blogs that come out on this every day, I am sure they would realise what an unbalanced argument it has become because of the way in which all these things are presented here in this country.

I have been critical in the past of both the industry and the Government for failing to realise the extent to which they need to fight the case for the development of a shale gas industry. To be fair to the industry, it has now started a considerable programme called “Let’s talk about shale”. Briefly, the leaflet I have been sent speaks of the very considerable activities that the industry is now taking—primarily in the areas of the Bowland shale deposits, because that is where the main arguments come from at the moment, but of course that can eventually be spread nationwide. That is a welcome development, if perhaps a bit belated, but at least it is now happening.

The one point where I agree with the noble Baroness is that the Government have to match that as well, and take these scare stories seriously and counteract them. Indeed, when I talked to the head of the trade association UK Onshore Oil and Gas, I said, “Learn the lesson of instant rebuttal”. We learnt that from a previous Government. If they wanted to scotch a rumour, it had to be the subject of an instant rebuttal. I see very little sign in the media that either the industry or the Government are yet engaging effectively in the instant rebuttal of scare stories.

Having said that, I will perhaps anticipate what my noble friend will say. We now have the most effective system of regulation in the world for our oil and gas resources. It is of a very high standard and admired across the world. There is absolutely no suggestion that the existing powers of the Environment Agency and other bodies involved in this need reinforcing by additional statutory provisions, as in these amendments.

I read the amendments and thought, “For goodness sake, all this is happening already”. The noble Baroness mentioned baseline monitoring. The Environment Agency has the powers—as have the Scottish Environment Protection Agency and Natural Resources Wales—to require baseline monitoring of those environmental indicators it considers appropriate and for the lengths of time it deems suitable for each given site. We discussed this in Grand Committee. I was certainly there arguing that baseline monitoring is hugely important. If there is to be any question of contamination, you have to know what you are starting with. That is what it means and we do that in this country already. I have never heard it suggested that it is anything other than fully effective.

I am not sure that we need the additional provisions in the noble Baroness’s amendments. I have great faith in the ability of our existing monitors. They have these powers and the duties imposed on them. They do not need to be told in detail by Parliament what to do and how to do their jobs, so this is probably unnecessary. I understand the motives behind the amendments, but the issue should be dealt with effectively by proper information programmes to counter the mischievous rumours that one reads in the press every day. I shall be interested to hear my noble friend’s response from the Front Bench, but I do not think that these amendments actually add anything to what we have already.

[Baroness Young of Old Scone (Non-Afl)]

My Lords, I rise to support Amendment 113G. I declare a past interest, having been chief executive of the Environment Agency for eight years. This is a technology that is deeply distrusted by the public. Certainly, my experience of regulation in the environmental field is that if a degree of certainty can be given to both sides—the industry and the public—that is hugely beneficial in removing tension, distrust and suspicion. Industry used to tell me time and again that it would prefer to see clear, unequivocal regulation, which it could then fit its business around and make sure that it was compliant with, so that there was no doubt about the requirements that would be laid upon it. This was the most successful way of developing a degree of trust on hotly contested issues that could have an environmental impact.

Therefore, I urge the Minister to think seriously about placing in the Bill an environmental impact assessment and some of the other associated requirements here. Some of these exist elsewhere in legislation, but there is no harm in making the point that whether they are implemented is not the decision of the Environment Agency but a requirement because this technology is so distrusted by the public. I think it should cover exploration as well as extraction. It should also be associated, if I may say so slightly in advance, with the two amendments—or at least one of them—that I have put down, which we will be debating later. Certainly in the initial stages of this hotly contested area, we need belt and braces, not just belt.

[Lord Wigley (PC)]

My Lords, I am content to support Amendment 113G as far as it goes but, to my mind, it does not go anything like far enough. I regret that I will be introducing rather a disconsonant note to the debate. I will outline my opposition to hydraulic fracking, lock, stock and two poisoned barrels, in the debate on a later amendment in my name—here’s to knocking these diabolical fracking provisions out of the Bill. These amendments give a modicum of increased environmental protection, and I welcome the reference to the levels of methane in underground water, to which I shall certainly be returning in a later bank of amendments. I seek some clarification from the mover of the amendment on whether either the Scottish Parliament or the National Assembly for Wales has any role in the consideration of these draft instruments.

--- Later in debate ---

Moved by

[Baroness Young of Old Scone]

113H: Clause 32, page 38, line 8, at end insert—
“(c) outside—(i) Special Areas of Conservation as designated under European Council Directive 92/43/EEC;(ii) Special Protection Areas as classified under European Council Directive 2009/147/EC;(iii) land which is functionally linked to Special Protection Areas and Special Areas of Conservation;(iv) Sites of Special Scientific Interest;(v) National Parks;(vi) the Broads;(vii) Areas of Outstanding Natural Beauty; and(viii) World Heritage Sites.”

[Baroness Young of Old Scone]

My Lords, I am slightly nervous about speaking to Amendments 113H and 115 in my name on the Marshalled List. The mood of the House appears to be that if you dare to utter a word that strengthens environmental protection in any way you are immediately regarded as an anti-fracker. In my case, nothing could be further from the truth. I hope that my track record in having managed a good balance between business and the environment for many years in the Environment Agency and before that is an example of how environmentalists can be keen on ensuring good levels of protection, while not then getting in the way of progress or commercial activity.

The two amendments are about the need for protection of our most important conservation areas. Amendment 113H is similar to one about which we talked in Committee but has some significant differences. I thank the Minister for meeting me last week to discuss my concerns and to debate the best way forward in addressing them. The reality is that there are possible impacts on nature conservation and biodiversity as a result of fracking. We know about them; in terms of water abstraction and pollution, and habitat damage and disturbance, they have been rehearsed adequately here and in another place.

I will give an example—which I am sure is absolutely uppermost in your Lordships’ minds every minute of the day—and that is pink-footed geese. The pink-footed geese in this country in the winter comprise about 85% of the global population. We are hugely important for the survival of the species on a global basis. They are highly dependent on three parts of the UK for their wintering grounds and at least one of those, if not more, is a key site for shale gas extraction; that is, the Bowland area in the north-west. We really have to get this one right, not just for us and the pink-footed geese but for global conservation. If we expect other countries to look after their biodiversity in order to prevent species going extinct, we have to play our role with those species for which we have a huge international responsibility.

That is the whole purpose of some of those protected areas, to ensure that important habitats and important species are not put into jeopardy as a result of other activities. So there are areas where, when push comes to shove, their biodiversity importance has to take predominance. Less than 12% of the area currently potentially available for shale gas extraction comes under such designations, so we are not talking about huge areas. The amendment is seeking to demonstrate that we need to make special provisions and avoid extraction in those areas or where it would impact on land that is functionally linked to those areas, which would also create detriment as a result of that linkage.

Apart from the biodiversity and conservation importance of the amendment, it is vital to try to put up front what the key requirements are so that the industry is clear about what it needs to steer away from. In the very early stages of the offshore wind debate there were a number of sites in the North Sea that were, quite frankly, barking in terms of their biodiversity impact. To give them their due, organisations interested in biodiversity conservation and the industry worked together to identify the areas where it would be crazy to try to get offshore wind developed and, therefore, the areas where by default it was a sensible idea to press ahead. That good piece of work demonstrated very clearly where the industry could get ahead, get licences and start to generate power in a way that was not going to be stultified by conflict with the conservation movement. That is the approach we should be taking with shale gas extraction, to ensure clarity about those areas where it is really not a good idea to be proposing this, so that people can get ahead and move much more quickly in the areas where there is not that potential for conflict.

That is Amendment 113H. I know that the Minister is not inclined to accept it but there it is, for what it is. I am sure the Minister will say that there is the National Planning Policy Framework, which puts in enough controls, and that there is other European-linked legislation that will put in other controls, but I believe that it is worth putting it in the Bill, in one place, so that nobody is in any doubt about the areas that both the Government and the public would like shale gas extraction steered away from so that other areas can be much more rapidly exploited.

Amendment 115 is a fallback proposition—plan B, as it were—should the Minister not be inclined to accept the list, which is actually a shorter list than in my original amendment in Committee; I have taken out all the local wildlife sites and kept only the nationally and internationally important sites. If the Minister is not too thrilled with Amendment 113H, Amendment 115 might be a more practical proposition.

There is already precedent. There is planning guidance that the Government, in a very welcome fashion, have put down with regard to applications for development within AONBs—areas of outstanding natural beauty—and national parks. What I am asking for in Amendment 115 is a degree of consistency across all the landscape and conservation designations, with other protected areas being brought into that planning guidance. If not, there will be a feeling in the industry that if the Government think it is so important to give planning guidance for AONBs and national parks, and since they have not thought it as important to give planning guidance for SACs, SPAs, Ramsar sites and sites of special scientific interest, there is some sort of hierarchy and that the areas of outstanding natural beauty and the parks are more to be steered away from than the other designations because the Government have given additional guidance on them.

It would be useful if the Government would acquiesce to Amendment 115 and expand the planning guidance that has already been given to some protected sites to others in order to send a signal that the Government believe—and I absolutely accept that they do—that all these protected sites are important. I beg to move.

--- Later in debate ---

[Lord Jenkin of Roding]

The noble Baroness had an amendment in Grand Committee which addressed the question of whether there should be downward drilling and whether pads for developing shale gas could be located in any of these places. Although we did not vote in Grand Committee, the argument was perfectly clear that it would depend on the site. You have got planning permission and you have got a whole range of other things. I must confess I have not reread the noble Baroness’s debate on that occasion, but what we were talking about here is 300 metres below.

[Baroness Young of Old Scone]

Perhaps I may give just a couple of examples. Water pollution and the impact on aquifers in general could be quite a substantial issue. We already know that the volume of wastewater coming from shale gas extraction sites is substantial. For the most part that will be brought back to base, but where aquifers are involved we are not absolutely clear about that. There are a number of issues which are not just the site-based issues on the surface. They are about what is happening in terms of underground processes as well.

--- Later in debate ---

[Baroness Young of Old Scone]

My Lords, I thank the Minister for her words, and all noble Lords who have contributed to this debate. I am reassured that there is already strong environmental protection for these sites, but I am not reassured that it is necessarily always going to work.

There are two dimensions. First, I was interested in the experience of the noble Earl, Lord Caithness, and his wind farms. There was an example where there were environmental considerations that should have given a strong signal to the developer that it was not a sensible place to put a wind farm, but he nevertheless barrelled on. One assumes that it will go to appeal. So we are not giving the right signals to potential developers of sites that it is a waste of their time, effort and money to get into disputes in areas where there is a very strong case for the protection of the biodiversity interest, and where it is therefore going to be a struggle for them to get permission. We need to give them very strong signals that it is going to be a lot easier and cheaper for them not to set their hearts on some of these highly protected biodiversity sites.

We also have a case in Kent at the moment, for a housing development being proposed to the local authority. I am earnestly hoping the planning authority will turn it down. It is a proposition for 5,000 houses to be built on 300 hectares of a site of special scientific interest. If the development goes ahead it will be the largest loss of SSSI land for the last 30 years in this country. It will be a complete outrage. But the developer has been barking enough to set themselves on that site. That is an example where the developer is simply not reading the signals, so the signals need to be absolutely explicit.

I very much appreciate the point that the noble Lord, Lord Whitty, made. This is an effort to try and make sure that fracking gets off on the best possible foot, with a really clear commitment linked specifically to shale gas extraction about environmental protection being absolutely paramount. We should not rely just on other pre-existing legislation but gather together the real requirements that this industry needs to take account of, so that we can reassure the public and move ahead.

I was hoping that the noble Baroness might give me hope for Amendment 115 at future stages of the Bill, because the situation seems totally anomalous. I would like to understand from her why the Government felt it necessary to issue guidance on areas of outstanding beauty and national parks, which have strong environmental protection requirements already, but not on the other nature conservation sites. However, I beg leave to withdraw the amendment and hope the Minister might think more kindly of the amendments in pushing the Bill to another place.

Amendment 113H withdrawn.