The Association for Financial Markets in Europe (AFME) has called on the UK government to focus on better financial regulation, bolster its relationship with the EU, and tackle issues in financial services collaboratively. In a paper outlining its vision for UK capital markets, AFME welcomed the new Labour government’s focus on green growth and intention to deliver many of the country’s goals with the help of private sector finance. “However, we would also encourage the government to recognise that the financial sector’s ability to support the transition will depend to a large extent on whether the conditions are in place to enable the real economy to transition, thereby creating opportunities for finance and investment to support such activities,” the association said. One of its suggestions was to more closely link the UK Emissions Trading System (ETS) to the EU’s, noting this would help to enhance confidence in both carbon markets, reduce compliance costs for covered entities, optimise price discovery, and enable participants to manage their carbon exposure more effectively. “Critically, such linkage would negate the need for carbon borders between the UK and EU, thereby preventing carbon leakage and alleviating the significant challenges that industry is likely to encounter with the implementation of carbon border taxation,” AFME said. In addition, should the UK government choose to proceed with its own green taxonomy, AFME argued it should be voluntary, decision-useful, usable in practice, and interoperable with other key taxonomies.
