My Lords, I begin by thanking the noble Baroness, Lady Worthington, for sparing the time to meet me to discuss this amendment before today and repeat my offer that, should she wish to have further meetings with me or the Bank of England I am sure that I can happily facilitate it. I thank the noble Baroness, Lady Kramer, for once again making a very eloquent contribution to this debate.
I am sympathetic to the motives behind this amendment. Climate change, demographic change and technological change are important structural issues, as the noble Lord has just said, which could indeed have a very significant impact on financial stability. It is right that the macroprudential authority should be alert to these, and other, long-term systemic risks. However, as I hope other noble Lords will agree, in the light of what I am about to say, the amendment is unnecessary, so I do not feel able to accept it.
I start by stressing one point. The current legislation places no limit on the time horizon of the systemic risks that the FPC must consider in its assessment of the risks to the resilience of the UK financial sector. Therefore, the current legislation already provides for the consideration of long-term systemic risks such as those listed in the amendment. Indeed, at its meeting of March 2015, the FPC discussed precisely one of those risks: the risks to financial stability from climate change. This is evidence that the FPC has previously considered longer-term systemic risks, and may do so again in future, should it see fit. Although the FPC concluded that the risks from climate change would not materialise within its typical policy horizon, the Bank is also taking action on longer-term systemic risks through other channels, given the importance of these issues. I shall draw noble Lords’ attention to just three, although I am happy to meet to discuss the issue further.
First, the issue of climate change has been added to the Bank’s One Bank Research Agenda. I would be very happy to arrange for the noble Baronesses, Lady Worthington and Lady Kramer, to meet with Bank officials to discuss this issue in more detail. Secondly, the governor of the Bank is using his chairmanship of the Financial Stability Board to consider the risks that climate change poses for financial stability and the steps that could be taken to mitigate them, including through improved disclosure. I remind your Lordships of what the governor said in the speech to which the noble Lord referred. He said:
“With better information as a foundation, we can build a virtuous circle of better understanding of tomorrow’s risks, better pricing for investors, better decisions by policymakers, and a smoother transition to a lower-carbon economy”.
He set out in quite a lot of detail what he considered the most effective disclosures are—they are,
“consistent, comparable, reliable and clear”,
and “efficient”.
Thirdly, the Bank’s open forum will host a public discussion of some of the types of risks raised in this amendment, such as how financial innovation and technology can support the economy and how financial markets can regain their social licence. Those are just three of the steps that I would like to highlight. I would be more than happy to meet the noble Baroness again. I hope that what I have said addresses some of her points and that she will withdraw her amendment.