The UK’s largest insurance company has said it supports giving regulators a statutory duty to facilitate the financial sector’s alignment with net zero, and to consider the importance of reversing nature loss.
Aviva has made the recommendation in a position statement, Delivering the UKs Net Zero Transition, which is co-authored with WWF. The paper argues that despite the government’s leadership on some issues, such as mandating companies to issue transition plans, the pace and scale of action is not yet sufficient to address the climate and nature emergencies.
Aviva and WWF join a number of civil society organisations, such as ClientEarth and the Finance Innovation Lab (Fil), in backing a statutory green mandate. The UK government has undertaken a major review into the future of financial regulation, and has prepared new legislation, which the groups say should be used to strengthen the legal basis for regulators to prioritise environmental issues.
However, Fil reacted with dismay yesterday when the announcement of the government’s new financial services and markets bill was revealed to contain no mention of climate at all.
“We are shocked that climate is not mentioned anywhere in the government’s lobby pack in relation to the new bill,” Marloes Nicholls, the group’s head of policy, told Green Central Banking. “Given the government is still chair of the Cop and has promised the world’s first net-zero financial centre, the absence of climate objectives in the bill is of fundamental concern.”
The Aviva paper also includes a further series of recommendations, many of which are focused on the central role of transition planning in delivering the UK’s climate and nature goals. The authors want regulators to set out clear, science-based expectations about what should be included in the plans, and what steps that will be taken to enforce those requirements.
The authors also say the government should include provisions relating to the protection and restoration of nature in the sustainable disclosure requirements (SDR) and the UK’s forthcoming green taxonomy. The SDR will introduce an integrated disclosure regime on sustainability issues for UK companies, and is the regulatory instrument by which certain companies will be required to publish climate transition plans.
There is a growing call among central banks and regulators for nature issues to be treated with a similar level of urgency as is currently the case with climate concerns. Frank Elderson, an executive board member of the European Central Bank, said earlier this year that much of the analytical framework for addressing climate risks can be transposed to apply in the nature context.
The Aviva paper agrees, saying that without an integrated policy approach, efforts towards climate and nature goals will be impeded, as the success of one is fundamentally dependent on the success of another. It also suggests the UK should use its leadership as a member of the G7, G20 and upcoming Cop summits to push for a joined-up approach to climate and nature transition planning.
Although the Financial Conduct Authority and Prudential Regulation Authority have already been asked to have regard to the UK’s commitment to reach net zero by 2050, civil society groups have said this does not go far enough.
In its submission to the Treasury’s future regulatory framework review, the environmental law charity ClientEarth said that giving regulators explicit climate and nature objectives would help ensure that sufficient resources are diverted to those issues, and would streamline the process for enacting new regulation without needing to wait for legislation.
This page was last updated May 13, 2022
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