Financial firms that control around 40% of global assets will align themselves to the Paris Agreement 1.5 degree warming limit, Chancellor Rishi Sunak will say on Wednesday at critical UN climate talks.
On “finance day” at COP26 on Wednesday, Mr Sunak will laud the “historic” climate commitment from global firms that control $130tr (£95tr) of financial assets.
The chancellor will also reveal that the UK is to force all financial institutions and listed companies in the UK to publish plans on how they will transition to net zero from 2023.
The Treasury says the commitments will help to create a “huge pool of cash that could fund our net zero transition”, including the move away from coal and the shift to electric cars.
A flurry of announcements about cash are expected as finance ministers meet in Glasgow, but the contentious issue of climate finance, being discussed in the afternoon, may prove a real sticking point.
E3G’s Heather McKay said the chancellor’s plans were about giving business’s certainty. “Unless investors have clear guidance and a rule book on what is green and what isn’t, how can we expect them to make credible transition plans?” she said.
But she said it was crucial government recognises that “transition plans alone” are not enough, and that public finance needs to be aligned with net zero too because it can lower risk for private finance to follow.
Key announcements from the talks so far include:
• At least 110 countries representing 85% of the world’s forests agreed to end and reverse deforestation by 2030.
• South Africa will get help to decarbonise from the UK the EU, the US, France and Germany, in a new partnership that shows how side deals agreed outside of the traditional UN process can help close the emissions gap.
• Scores of world leaders signed a pledge to slash potent climate heating gas methane by 30% by 2030, which significantly help slow short term warming.
• Japan committed extra $10bn climate finance over five years, meaning rich countries could hit $100bn a year target one year sooner than expected, US climate envoy John Kerry said, as it “has the ability to leverage” a further $8bn
• Over 40 world leaders back plan to fund clean technology around the world by 2030, the UK government announced
• India finally came forward with a net zero promise – the 2070 target is 20 years later than the key 2050 date but still a big step forward, especially with its commitment to significantly slash emissions by 2030
• Boris Johnson warned the 1.5 degrees target is the difference ‘between life and death’
• Five countries, including Britain and the United States, and a group of global charities promised $1.7bn to support indigenous people’s conservation of forests and strengthen their land rights
UK finance bodies’ net zero plans will be tested for greenwash against “gold standard” guidelines to be drawn up next year by a new Transition Plan Taskforce, with members from industry, academia, regulators, and civil society.
The $130 trillion of assets being “aligned with the Paris Agreement” comes from 450 firms that are part of the Glasgow Financial Alliance for Net Zero (GFANZ), a voluntary and self-regulated body chaired by Mark Carney, former Bank of England governor and UN special envoy on climate action and finance, who is also speaking on Wednesday.
Ahead of his speech he told Sky News: “We are trying to turn finance from a fault line to a pipeline, the point is to get finance to where it’s needed most in emerging and developing economies, to the big projects in our economy, such as in the in the UK around the western world to get those emissions down.”
But he admitted there had been issues accessing the funds needed. “Some arms were twisted, some were recalcitrant. Yes. To be frank, some hadn’t really thought about it as hard as they should. But things take on their own momentum.”
But the big elephant in the room is the shortfall in climate finance promised by developed countries – which are mostly responsible for global warming emissions – to help poor countries green their economies and cope with the hard impacts of climate change.
A promise to deliver $100bn a year by 2020 was missed by several billions. COP talks are largely about trust and so the issue has the potential to damage negations if poor countries don’t see rich countries delivering on their promises.
Andrew Norton, director of the International Institute for Environment and Development, which works with the Least Developed Countries group of 46 nations at the annual UN COP talks, welcomed any new transparency.
He said: “The private finance market is not going to help poor communities adapt to the impacts of climate change, let alone cope with the losses and damage they will suffer.
“Public climate finance will remain critically important which is why rich nations need to meet and exceed the pledge of $100bn per year as soon as possible with at least half of that going to adaptation and in the form of grants, so the debt burdens of the poorest countries are not increased.”
Mr Sunak will on Wednesday say the plans he is announcing could “rewire the entire global financial system for net zero” – a statement that Greenpeace has dismissed as “a marketing slogan”.
Greenpeace UK’s head of politics Rebecca Newsom said: “These new rules seem to allow plenty of wiggle room for financial institutions to continue with business as usual, rather than ‘rewiring’ the system as the Chancellor claims.
“Transition pathways must be genuinely science-based, not determined by what industry participants in cozy alliances consider best practice at any given time.”
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