Insights from COP26: Day 3 - The wall of money
Finance Day at COP26 has delivered some big numbers and commitments that will have an impact on every UK-listed company and ultimately on their supply chains as well.
Opening Finance Day, Rishi Sunak, UK Chancellor of the Exchequer, announced that every company listed on the UK stock exchange must publish net zero transition plans from 2023. This scheme will be drawn up by a new Transition Plan Taskforce and overseen by the Financial Conduct Authority that will set a ‘science-based gold standard’ for the plans – which will need to include targets to reduce greenhouse gas emissions, and steps which firms intend to take to get to net zero.
While the news has been greeted with some reservations by NGOs (with some pointing out that unless the commitments made by business are legally required to be mandatory – i.e. not just the publishing of the plan but the delivery of the ambition - then there is a risk that business will use the plans as a route to greenwashing.
This of course assumes that the court of public opinion and scrutiny of business by all stakeholders is not a strong enough incentive for business to develop a credible plan and stick to it, which we’d argue is a powerful incentive in itself.
The Chancellor is promising nothing less than a rewiring of the entire global financial system which will make the UK the first carbon neutral financial centre. The UK has also convened over 30 other countries to back the creation of new global climate reporting standards by the IFRS Foundation. Welcome announcements but the devil will be in details to emerge.
In other significant developments, Mark Carney’s GFANZ (Glasgow Financial Alliance for Net Zero), a coalition of 450 global financial institutions which was only created in April and now represents 40% of the world’s financial assets, has announced it has up to $130 trillion of private capital committed to hitting net zero emissions targets by 2050. This after signing up all the major Western banks. Mark Carney (the UN Special Envoy Climate Action & Finance) has said that this means there is enough finance in place to fund the transition to a net zero economy now we just need the projects.
Michael Bloomberg, founder and majority owner of Bloomberg, is to join Mark Carney as co-chair of GFANZ. Mr Bloomberg and Mr Carney have co-authored a leading article this morning in which they declare “to fight climate change, put markets to work.”
World leaders may now be leaving COP26 but yesterday saw a raft of announcements and pledges by the nations who were attending the Summit. Some 103 countries have now signed a deal to reduce methane emissions by 30% by the end of the decade and UK Prime Minister Boris Johnson has said he’s optimistic that developed countries will meet the target of reaching $100 billion-worth of climate finance to help poorer countries to decarbonise.
That optimism will need to translate into tangible impact and money as the divide between the richer nations (who are the world’s largest carbon emitters) and the developing nations (which face the greatest relative cost and impact from climate change) has been a consistent theme and a lightning rod for calls for a ‘just transition’ to net zero that sees aid and assistance from the G20 flowing to the rest of the world to meet climate targets.
As today draws to a close at COP26, the Sports for Climate Action Framework (which includes the International Olympic Committee, FIFA, Athletics Kenya, BBC Sport, the Premier League, Formula E and Munster Rugby) has also committed to delivering net zero by 2040 and to reducing greenhouse gas emission by half by 2030.
One theme that continues to build, and will no doubt be a talking point tomorrow at Energy Day is the role of business in driving the transition. COP26 is constantly being discussed as ‘the business COP’, the COP where the private sector stepped into the spotlight and is finding the funding and solutions to drive net zero. One speaker today at the Green Horizon Summit@COP26 described it as ‘the moment that the troops arrived from the private sector’. It’s a huge opportunity for business to show environmental and social stewardship and deliver impact in a world that will have to change and decarbonise faster but, as today’s green wash protests also showed, it presents reputational and existential risks for those organisations that don’t have a credible plan and deliver it.