Hundreds of the world’s largest banks and pension funds with assets worth $130 billion have pledged to meet a key target of limiting greenhouse gas emissions, the UK government will announce on Wednesday.
The commitment of over 450 financial institutions in 45 countries is intended to be one of the main achievements of the UK hosts of the Cop26 summit in Glasgow, and comes alongside some of the summit’s other aims – primarily, to set the world on a path to limit global warming to 1.5°C – seem elusive.
Finance is the key to the massive economic transformation needed to move away from fossil fuels and reach net zero so that the global economy can operate without damaging the climate.
But experts and campaigners cast doubt on the government’s financial claims, pointing out that banks that sign up are still free to pour money into fossil fuels and only need to divert a small portion of their funding towards low carbon targets over the next decade.
News of the engagement came at the end of the second full day of the Cop26 conference in Glasgow as world leaders finished their speeches and negotiators prepared to discuss details that could form the basis of a final communiqué. next weekend.
On another frantic day of announcements, key developments included:
British Prime Minister Boris Johnson said he was “cautiously optimistic” that a deal could be struck to keep the 1.5C target on track. Returning to a football analogy in which he had said the world was the equivalent of a 5-1, he said on Monday night the scoreline was now “more like 5-2 or 5-3”.
The group of countries with the most ambitious climate goals, known as the High Ambition Coalition, has been bolstered by the announcement that the United States will join their ranks after fully withdrawing from the Paris Agreement under the former President Donald Trump. Observers said the move would bolster efforts to stay on track to meet the 1.5C warming target.
On Tuesday night, Rishi Sunak, the Chancellor of the Exchequer, said the City of London would become the world’s first ‘net zero financial centre’ and set new rules holding public companies to account for their plans to get to zero net emission.
He said: “I am proud that under UK leadership the number of financial firms committed to net zero schemes has tripled, with covered assets now totaling $130 billion. Harnessing the trillions of dollars controlled by these companies in the fight against climate change is crucial. So I announced new requirements for companies to publish their net zero transition plans. Together we can provide the money the world needs to stop catastrophic climate change.
The financial pledge, known as the Glasgow Financial Alliance for Net Zero (GFANZ), will mean that by 2050 all assets under management by the institutions involved will be aligned to net zero emissions. Economists have estimated that around $100 billion in investment will likely be needed over the next three decades to reach the net zero goal, so in theory GFANZ will provide more than enough liquidity to meet the goal.
Mark Carney, former Governor of the Bank of England, now UK and UN climate envoy, said: “The architecture of the global financial system has been transformed to deliver net zero. We now have the essential plumbing in place to bring climate change from the margins to the forefront of finance so that every financial decision takes climate change into account… [This] a rapid and large-scale increase in capital commitment to net zero, through GFANZ, makes the transition to a 1.5C world possible.
But experts told the Guardian the claims were overstated. The $130,000,000,000 figure refers to the assets the companies manage, of which only a small proportion – around a third – will be devoted to low-carbon investments over the next crucial decade, when emissions will have to be reduced. halved to prevent temperatures from rising more than 1.5°C above pre-industrial levels.
Simon Youel of the Positive Money campaign group said: “Banks may be preparing to increase their investment in ‘green’ business, but this announcement says nothing about financial firms investing in new fossil fuel projects. States must introduce restrictions against new investment in fossil fuels if we are to have any chance of keeping 1C alive.
Sunak has been accused of blocking green measures and would oppose the net zero program in government. He barely mentioned climate in his recent comprehensive spending review, his budgets contain few green measures and many high-carbon policies, and his speech in Glasgow is virtually the first time he has acknowledged COP26.
Sam Alvis, head of the economy at think tank Green Alliance, said: ‘It is definite progress that the Chancellor put the Treasury on the ground at Cop26. But trillions of dollars continue to be invested in fossil fuels every day, and voluntary action hasn’t gotten us far enough. To keep the 1.5°C target alive, governments will need to regulate companies not only to publish transition plans, but also to have strict criteria with legal teeth on their credibility and pace.
As rich countries have failed to deliver on their pledges of funding, diplomats from other parts of the world have undermined the credibility of donors.
India’s Foreign Minister Harsh Vardhan Shringla says it’s time for rich countries to face the same credibility checks on funding that developing countries are expected to accept on emissions cuts .
“There are a lot of commitments that are made but not kept,” he said. “The pressure on climate action should be equal to the pressure on climate finance. It’s not enough to set goals, you also need a way to achieve them. There should be tangible timelines, tangible follow-up.