Rishi Sunak at Cop26

UK will be ‘first net-zero aligned’ financial centre, says Sunak

Image credit: REUTERS/Phil Noble

Finance ministers are gathering at COP26 in Glasgow today (November 3) for 'Finance Day' negotiations, concerned with the provision of climate aid to developing nations and adapting financial systems to support decarbonisation.

Chancellor Rishi Sunak has spoken at COP26, using the platform to promise to turn the UK into “the world’s first net-zero aligned financial centre”. This involves requiring listed companies in the UK to publish their plans for transitioning to low-carbon business by 2023. These plans must include targets to mitigate climate risk; detail interim goals to 2050, and the measures necessary to meet them.

The ministry said: “There will be new requirements for UK financial institutions and listed companies to publish net-zero transition plans that detail how they will adapt and decarbonise as the UK moves towards a net-zero economy by 2050.”

A notable omission from Sunak’s plan is any mandatory commitment to net zero for companies or a ban on investment in carbon-intensive activities. Investors will be left to decide for themselves if companies’ plans are adequate and credible.

Catherine McGuinness, policy chair at the City of London Corporation, commented: “While many firms were already taking this step, the new rules will ensure that the UK sets the pace internationally.”

According to a government statement, climate commitments have been made by more than 450 private companies covering $130tn of financial assets (approximately 40 per cent of the world’s financial assets). These commitments, delivered through the Glasgow Financial Alliance for Net Zero - chaired by former Bank of England governor Mark Carney – are intended to create a vast cash pool to fund green technologies and other elements of the net-zero transition. Sunak celebrated the progress made to “rewire the entire global financial system for net zero”.

A new taskforce - named the 'Transition Plan Taskforce' - composed of industry, civil society and academic leaders will lay out a greenwashing-proof model for decarbonisation. The announcement of the taskforce coincides with the launch of a similar international body, the International Sustainability Standards Board, which aims to weed out greenwashing by companies overly keen to promote their sometimes questionable environmental credentials.

Sunak urged financial companies to “mobilise private finance quickly and at scale” and for governments to take advantage of these financial resources to decarbonise.

COP26 negotiations have been soured by, among other disagreements, the failure of wealthy nations to meet a target originally set in 2009 to provide $100bn annually to help developing economies decarbonise and build resilience. This is considered the foundation of a just decarbonisation, shifting responsibility to wealthy nations with historically high CO2 emissions. The UN estimates that vulnerable countries - such as small island nations - will need up to $300bn per year by 2030 for climate adaptation alone. The plight of such island nations was highlighted by UN secretary-general Antonio Guterres in his opening speech earlier this week, warning of their impending "death sentence".

Wealthy nations have failed to meet the $100bn target. Sunak said the pledge will be fulfilled by 2023, three years behind target (although Germany’s environment minister has suggested that a rush of last-minute pledges from countries, including Japan, could make it possible to meet this target in 2022).

“While we know we are not yet meeting it soon enough, we will work closely with developing countries to do more and to reach the target soon,” Sunak said, during his speech. “Public investment alone isn’t enough, so our second action is to mobilise private finance.”

The UK will aim to address barriers to finance faced by developing countries through new green initiatives funded from its international climate finance (ICF) commitment, which aim to make it faster and easier for developing nations to access funds. In total, the UK will spend £576m on a package of initiatives to mobilise finance in emerging markets and developing economies. A new financing mechanism, the Climate Investment Funds’ Capital Markets Mechanism, meanwhile, will be launched in an effort to boost investment into clean energy in developing countries.

Sunak’s support for a blended finance approach was echoed by Carney, now UN climate envoy. Speaking at COP26, he said: “We need blended finance facilities that don’t mobilise fractions of private capital for the public dollar, but multiples […] in double digits. There are facilities that are being developed that can do this: we need to scale them dramatically.

“The money is here, but that money needs net-zero aligned projects and there’s a way to turn this into a very, very powerful virtuous circle and that’s the challenge.”

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