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Jeremy Hunt has been criticised by UK green groups after he removed climate change from a list of four key priorities in a remit letter issued to the Bank of England committee responsible for financial stability.
At least once a year, the chancellor makes recommendations about the responsibilities of the Financial Policy Committee, which identifies and monitors risks to the resilience of the UK financial system, in a letter to the BoE governor.
Hunt told Andrew Bailey on Wednesday that the FPC’s four priorities for supporting ministers’ financial services strategy should be growth and competitiveness, competition and innovation, home ownership, and boosting productive finance.
In his letter last year, Hunt’s four priorities were climate change and energy security, international competitiveness, competition, and home ownership. In 2021, then chancellor Rishi Sunak named the same priorities.
Hunt’s latest letter on Wednesday, by contrast, laid out four priorities that all concerned economic growth. There was only one reference to “climate” elsewhere in the letter, where Hunt said the FPC should consider risks from climate change to be relevant to its “primary objective”.
That single reference to climate compares with three mentions in 2022 and 13 in 2021.
Simon Youel, head of policy at Positive Money, a research and campaign group, said the phrasing of Hunt’s letter seemed to suggest that ministers had “downgraded” their focus on making green finance a core pillar of the City of London.
“It is very concerning,” he said. “I don’t know if it will change much for the Bank of England . . . but it does seem to signal that in the government strategy for financial services, climate change no longer seems a priority.”
In 2021, Sunak outlined a strategy to turn the UK into a hub for green finance, where investments or loans are used to tackle climate change or deal with other environmental issues.
Bailey and his predecessor Mark Carney previously warned that climate change poses a huge systemic risk to financial markets, especially if assets become stranded — or difficult to sell.
One person familiar with ministers’ thinking said climate change was still a priority but that economic growth was a more important priority for the FPC. “We are trying to ramp up the growth objective,” they said. “It’s not that climate isn’t a priority; it’s that growth is a bigger priority.”
Hunt’s letter comes after the government set out new legislation to mandate annual North Sea oil and gas licensing rounds, which it says will strengthen Britain’s energy security, and watered down some net zero policies to avoid a public backlash against potentially costly new rules.
The Treasury declined to comment. However, one Treasury official said: “This letter better focuses the FPC on its core remit — promoting financial stability — and the effects of climate change and achieving net zero is central to that.”
But Doug Parr, policy director at Greenpeace UK, said the lack of focus on climate change and “constant flip-flopping on net zero plans” was “frankly embarrassing”.
Joshua Emden, senior research fellow at think-tank IPPR, said that while “the government still nominally requires the FPC to consider climate change risk”, the reduced focus on climate change in Hunt’s letter, his Autumn Statement and the broader policy agenda did “very little to reduce this risk”.
Ryan Skinner, research director at Verdantix, an advisory firm, said Hunt’s letter suggested the government was “no longer prioritising efforts to align private sector investment with environmentally sustainable growth”.
He said this could put the UK at a disadvantage internationally, warning that “more sustainable financing could flow to neighbouring states” as the EU doubles down on green finance.
Heather McKay, senior policy adviser at climate consultancy E3G, said it was “very concerning” that climate change and energy security had been dropped as policy priorities for financial services.
“To drive and deliver UK green growth and avoid falling behind international competitors, it is critical that the full potential of the UK financial sector is unlocked,” she added.
The BoE declined to comment. A person familiar with the matter said Bailey would respond to Hunt in due course, as is normal for remit letters.
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