Week One of the new Prime Minister’s role, 7 September, will see the Financial Services and Markets Bill come to Parliament. The Bill, which will set new rules for the UK’s finance system, is a historic opportunity to align UK money flows – some of which are currently extremely destructive – with the urgent needs of the planet. It’s also an important chance for the UK government to make good on the deforestation pledges it made at the COP conference in Glasgow last year.

The Bill will land in parliament in the wake of heatwaves across Europe and North America that have brought climate change into sharper public focus. Crop losses due to drought are no longer a distant problem but a challenge for Britain's farmers today. This summer also saw weather disruption to transport systems and predictions of lower worker productivity in the heat, which Britain can ill-afford.

More regular extreme weather events brought on by climate change are therefore certainly not an attractive domestic economic prospect, even before you consider how the economic disruption of global climate chaos will play out here, in one of the world’s largest financial centres.

So the former Economic Secretary to the Treasury, John Glen MP, was right when he described the wholesale reform of UK financial regulation as a ‘once-in-a-generation’ opportunity. But the current draft Bill needs amending – to include a statutory objective on climate and nature and to finally outlaw the funding of deforesting businesses - if this opportunity is to be realised. Britain’s new PM and their Chancellor, should put this high on their to-do list.

In its current form, the Bill would:

As currently drafted, it will also miss an opportunity to address what has been described by the UK government itself as a serious threat to the growth and stability of the UK financial system. In May 2022, the Bank of England concluded climate change will cost UK banks more £340 billion by 2050 if climate action is severely delayed.

Global Witness is therefore calling for two key amendments to the Bill:

1. The introduction of a statutory objective for regulators to consider nature and climate in all new regulations

The introduction of a climate and nature-specific statutory objective would enable UK regulators to balance climate and nature and competitiveness, preventing a dangerous race to the bottom for UK finance. The government’s Greening Finance Roadmap is designed to ensure financial actors can ‘factor climate-change into every investment decision’. Without an explicit obligation for regulators this aspiration will not be realised. These proposals are also being supported by Aviva, WWF, E3G and ShareAction.

2. The introduction of a ‘forest finance amendment’ requiring financial actors to conduct relevant due diligence on any clients dealing with forest-risk commodities, to ensure they are not funding deforestation.

The deforestation amendment would provide a much-needed tool to stop UK financial institutions from fuelling deforestation and the violence against Indigenous Peoples that is associated with it.

At least 11% of global CO2 emissions come from deforestation and forest degradation and the UK plays an outsize role in this destruction. Over £300 billion of UK pension money is invested in companies and financial institutions with high deforestation risk and the UK financial sector faces up to £200 billion in risk exposure in Brazilian beef and soy supply chains and Indonesian palm oil supply chains alone.

The forest finance amendment is a logical next step to the 2021 Environment Act, which, if implemented properly, will ban the use of certain goods produced on illegally deforested land. However, until such laws ALSO cover finance, UK based financial institutions will keep on backing deforesting companies – who access markets elsewhere- whether or not those businesses are compliant with the new rules. This undermines the aspirations of the Environment Act and government commitments to tackle global deforestation.

There is an increasing understanding that the UK’s greasy money pipeline to deforestation has to stop, with many MPs raising the issue and even the government’s own Global Resource Initiative taskforce calling for a forest due diligence law for the financial sector.

YouGov polling for Global Witness in late 2021* suggested such a law has good public backing – with two thirds of the public in support. When taken with the surge in public concern regarding climate change following the heatwaves,  Autumn could be a prime time for the government to move.

Other countries are waking up to the need to shift finance away from deforestation. European MEPs recently backed the inclusion of financial actors in their forthcoming anti-deforestation law. John Kerry, U.S. Special Presidential Envoy on Climate Change, has promoted ‘a shift in commodity and financial markets to advance deforestation-free commodity production’.  

Deforestation is a ‘top priority area’ in the UK’s Net Zero Strategy. Current regulation is not working. Financial institutions are aware of their complicity in forest destruction and human rights abuses, but they continue to hide behind weak voluntary pledges, hoping that the public and government will not notice. This is an unmissable chance to redesign UK financial regulation that delivers a liveable planet, with all its benefits for economic stability. The new PM cannot let the financial sector off the hook this time.

* Private polling for GW by YouGov in Dec 2021 found that when asked “To what extent, if at all, would you support the Government introducing a law to ban banks from lending money to or doing work for organisations who are involved in deforestation overseas?” 67% supported the idea. Looking at the data from a party alignment perspective - 65% of those who voted Conservative in the 2019 General Election supported the idea.


  • Veronica Oakeshott

    Campaign Strategy Lead, Forests Policy and Advocacy