Financial markets, climate change, economic and social utility

This section is dedicated to the work the Financial Inclusion Centre is undertaking on:

  • the impact of financial markets and services on climate change; and
  • the wider economic and social utility of financial markets and services.

Time for Action

The Financial Inclusion Centre published a major report, called Time for Action, which assessed the degree to which the financial system (financial markets, financial institutions, and individual consumers) contributes to tackling the climate crisis.

The report was sponsored by Friends Provident Foundation and also assessed the daunting barriers holding back the financing of what we term sustainable, responsible, and social impact (SRI) activities; and made over 40 policy recommendations to ‘green the financial system’ and increase the level of SRI financing.

Some of these interventions are radical and far-reaching. But, the scale of the climate crisis, and need for the financial system to play its full part in tackling that crisis, requires radical interventions. The report can be found here: Time for Action Greening the Financial System

The Devil is in the policy detail

As part of its programme of work on sustainable, responsible, and social impact (SRI) finance, FIC has begun a new project called The Devil is in the policy detail – will financial regulation align financial market behaviours with climate goals? 

The new project follows on from Time for Action which was a higher level systems analysis of the barriers inhibiting the financing of sustainable, responsible, and social impact (SRI) activities. But, FIC believes that not enough attention has been paid to the detail of the key policies proposed by the main regulatory authorities to align the behaviours of financial institutions with climate goals.

Therefore, this new project intends to evaluate in more detail the main policy and regulatory tools. We are very grateful to Friends Provident Foundation for also supporting this follow up project.

The project spans both prudential and conduct regulation directly aimed at financial institutions such as banks, insurers and asset managers, and new disclosure requirements. 

We are producing a series of podcasts to accompany the new work. These can be found here: Podcasts: The Devil is in the policy detail – will financial regulation align financial market behaviours with climate goals?

The economic and social utility of financial markets and services

As well as working on financial inclusion and access, and consumer protection, FIC develops policy to promote sustainable, economically and socially useful financial markets and services.

FIC produced a major report, sponsored by the TUC, called An Economic and Social Audit of the City. As its many champions constantly tell us, the City provides huge benefits to our economy in the form of contribution to GDP, tax take, balance of payments, employment and usage of financial services by UK households. This is undoubtedly true.

But, as our report showed, these benefits must be set against significant economic, financial and social costs caused by the City’s activities. (Note we use the ‘City’ as shorthand for the wider financial services sector and financial system.)

To our knowledge, this is the most comprehensive attempt by a civil society organisation to bring together the available evidence on the benefits and costs of the City. It is self-evident the financial sector needs to be reformed if it is to meet the needs of households and the real economy.

Post Brexit, the future regulation of the financial sector is being hotly contested. There are concerns that industry lobbies threaten to undermine hard won improvements in financial regulation and consumer protection.

The Economic and Social Audit of the City can be found here: An Economic and Social Audit of the City