Finance chiefs give green light to net zero

Major banks and other financial companies across the globe committed more than $100 trillion of private capital on Wednesday to hitting net zero emissions targets by 2050.

David Sapsted

3 November 2021

The initiative, unveiled at the COP26 summit in Glasgow by Mark Carney, the former governor of the Bank of England, came as Chancellor of the Exchequer Rishi Sunak announced plans to make the UK the “first ever net zero-aligned financial centre”.Mr Carney - who, with former New York mayor Michael Bloomberg, chairs the Glasgow Financial Alliance for Net Zero (Gfanz) comprising more than 450 banks, insurers and asset managers across 45 nations - told the conference that $100 trillion-plus of financing could be delivered over the next 30 years to help economies transition to net zero.“We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account,” he said.

UK financial services sector must publish "clear deliverable plans" on how they will transition to net zero

At Wednesday's gathering in Glasgow of finance ministers, central bank governors, heads of multilateral financial institutions and senior industry leaders, Mr Sunak also announced that it would become mandatory for firms in the UK financial services sector to publish “clear, deliverable plans” on how they will decarbonise.From 2023, all financial institutions and listed companies in the UK will be forced to publish plans on how they will transition to net zero.

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UK will donate £100 million to the Sustainability Standards Board

The UK will also donate £100 million to a task force, the Sustainability Standards Board, to monitor access to climate finance, and will support a new capital markets' mechanism, which will issue billions of new green bonds to fund renewable energies in developing countries, Mr Sunak said.The Treasury in London said the task force would set a science-based "gold standard" for the plans in order to guard against so-called green washing - environmental initiatives that are more about presentation than substance.

Green finance in the UK and around the world

Ben Caldecott, director of the UK Centre for Greening Finance and Investment, told the BBC that the plans would "spur demand for green finance and accelerate decarbonisation, not just in the UK but wherever UK firms do business".Kay Swinburne, vice-chairman of UK financial services at KPMG, said the announcement would provide the financial services sector with a "valuable set of unified metrics to measure progress towards decarbonisation".Rain Newton-Smith, chief economist at the Confederation of British Industry (CBI), said: “Business is upping its game at this critical moment, with a major increase in sustainable finance and new plans to scale the flow of capital to emerging economies."The establishment of the Sustainability Standards Board, as well as the chancellor's announcement for firms to publish net zero transition plans, are steps in the right direction. “These need to be followed up with further action from policy makers to develop globally consistent climate and sustainability disclosure standards.”

Financial services sector investors must "prioritise funding sustainable projects"

Catherine McGuinness, policy chair at the City of London Corporation, urged financial sector investors to prioritise funding sustainable projects this decade to “drive the green revolution”.Speaking in Glasgow, she said the financial sector must make capital investments where they will make the most difference, adding that “shrinking our brown holdings might make us feel good, but it will not be sufficient”.Ms McGuinness added: "We will need to mobilise and deploy capital into real world projects across the world to drive the green revolution. The stakes could not be higher. We have to be bold, and we need to deliver projects in time for 2030, not just for 2050.“There will be massive business opportunities, and government can help us channel finance and manage risk. The money is there; we now need to mobilise it to where it will make the most difference.”