By Yusra Barmaz
On Tuesday, 9th November, the UK’s Chancellor of the Exchequer, Rishi Sunak, gave insights into the UK’s ambitions and strategy for the development of the country’s financial services sector. In particular, the Chancellor laid out the UK’s plans for the industry after Brexit. Here, we explore some of the key takeaways from Mr. Sunak’s speech.
The UK is aiming for ‘net zero’ by 2050, and the Chancellor’s statement noted that the financial services has a key role to play in meeting the ambitious reduction of carbon emissions in 30 years’ time.
The Chancellor explained the UK aims to become a global leader in green finance. Establishing the UK as a green leader also ties in with the UK hosting the UN’s Climate Change Conference in November next year.
With regards to concrete plans, Mr. Sunak noted that the UK’s government is planning to issue its first Sovereign Green Bond in 2021, and the government has already expressed interest in creating similar financial instruments thereafter. The introduction of the UK’s Green Bond serves to meet exponential investor demand and increase private capital available to invest in the infrastructure required to create a greener economy in the UK.
Environmental disclosure was also on the agenda. The UK proposes to implement a disclosure framework which aims to make it easier for investors to better understand a company or investment’s environmental impact.
The UK is also aiming to be the first adopter of the Task Force on Climate-related Financial Disclosures (TCFD). Under the proposal, companies would be required to track and report relevant data by 2025, either complying with TCFD regulations or explaining why they haven’t met TCFD targets. Listed companies, privately-held businesses of significant size, banks, building societies, insurance firms, asset managers registered in the UK, and UK pension schemes will likely be required to commit to making environmental disclosures.
The UK are also aiming to implement a standardised framework which would identify what activities and industries are deemed to be environmentally sustainable or not. With this in mind, a taskforce (the Green Technical Advisory Group) will be set up to deliberate what such a structure might look like. The UK also intends joining the International Platform on Sustainable Finance to support and benefit from the development of common international standards.
The government acknowledged the technological advances in financial services. The aim is to keep the UK at the forefront of such future advances and change. The Government will propose a regulatory approach to stablecoin (privately issued digital currencies) initiatives in order that they meet the same standards as other payment methods. The expansion of stablecoin use could transform the way people store and exchange their money with the aim that payment become faster and cheaper.
On a similar theme the Chancellor also welcomed the work that HM Treasury and the Bank of England have done to consider the issuing of digital currencies by Central Banks and the leading role they are playing in such conversations on the global stage.
Equivalence after Brexit
Brexit continues to be a big question for many in the finance industry, especially for companies operating in the UK that have close ties or interests in EU countries. With the equivalence rules underpinning the relationship between the UK and the EU and other
As the Brexit transition period draws to an end at the end of the year with negotiations continuing, the Chancellor announced the UK will be granting a package of equivalence decisions to the EU and EEA states and published a guidance document setting out the UK’s ambitions for financial services sector equivalence with overseas jurisdictions. The UK noted it was committed to being ‘open, predictable and transparent, even in the absence of clarity from the EU on their approach.’
The UK also outlined its ambitions to create a role for its financial services industry when it’s outside the EU. To this end, the Financial Services Bill was debated in the House. The aim of the bill is to adapt the UK’s regulation to position the UK as a top contender in the financial services sector, balancing regulation with a competitive business environment.