Hundreds of the world’s largest banks and pension funds with assets worth $ 130tn have committed to a key target in reducing greenhouse gas emissions, the British government announced on Wednesday.
Promised by more than 450 financial institutions in 45 countries, it is intended to be one of the best performances by the British hosts of the Cop26 Summit in Glasgow, and comes as some of the other goals of the Summit – primarily to put the world on a way to limit global warming to 1.5C – looks hard to reach.
Financing is the key to the massive economic transformation required to move away from fossil fuels and reach net zero so that the global economy can operate without harming the climate.
But experts and advocates cast doubt on the government’s financial demands, pointing out that the banks that make the promise are still free to pour cash into fossil fuels and only need to divert a small portion of their funding to low-carbon purposes in the next decade.
The news of the promise came at the end of the second full day of the Cop26 conference in Glasgow, as world leaders concluded their speeches and negotiators were preparing to exhaust details that could form the basis of a final communication next weekend.
On another hectic day of announcements, the key developments included:
British Prime Minister Boris Johnson said he was “cautiously optimistic” about reaching an agreement to keep the 1.5C target on track. Returning to a football analogy where he had said the world was 5-1 down, he declared Monday night that the score 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, was reinforced by the announcement that the United States would rejoin their ranks after withdrawing from the Paris Agreement completely under former President Donald Trump. Observers said the move would strengthen efforts to stay on track for the 1.5C heat target.
On Tuesday night, Finance Minister Rishi Sunak said the City of London would become the world’s first “net-zero financial center” and set new rules forcing public companies to report on their plans to achieve net-zero emissions.
He said: “I am proud that the number of financial companies committed to net zero plans has tripled under the UK’s leadership, with assets now totaling $ 130tn. It is crucial to leverage the trillions of dollars, “controlled by these companies in the fight against climate change. So I’ve 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 financing promise, known as the Glasgow Financial Alliance for Net Zero (GFANZ), will mean that by 2050, all the assets managed by the institutions involved will be in line with net zero emissions. Economists have estimated that around $ 100tn in investment is likely to be needed over the next three decades to reach the net-zero target, so in theory, GFANZ will provide more than enough cash to reach the target.
Mark Carney, former governor of the Bank of England, now a climate envoy from the UK and UN, said: “The architecture of the global financial system has been transformed to deliver net zero. We now have the necessary plumbing in place to move climate change from the outskirts at the forefront of finance, so any economic decision takes climate change into account … [This] Rapid and large-scale increase in net zero capital commitments through GFANZ makes the transition to a 1.5C world possible. “
But experts told the Guardian that the allegations were exaggerated. The figure of 130 t. USD refers to the assets that companies have under management, of which only a small part – about a third – will be used for low carbon investments in the crucial next decade, where emissions must be halved to prevent temperatures from rising with more than 1.5 C above pre-industrial levels.
Simon Youel of the Positive Money campaign group said: “Banks may be preparing to scale up investment in ‘green’ activities, but this announcement says nothing about financial companies’ investment in new fossil fuel projects. States must impose restrictions on new investment in fossil fuels if we must have a chance to keep 1C alive. “
Sunak has been accused of blocking green measures and is said to be against the net-zero agenda of the government. He barely mentioned the climate in his recent comprehensive spending review, his budgets have included few green initiatives and many low-carbon policies, and his speech in Glasgow is practically the first time he has recognized Cop26.
Sam Alvis, chief financial officer of the Green Alliance think tank, said: “It is a clear step forward that the chancellor has got the Treasury on track at Cop26. But trillions of dollars are still flowing into fossil fuels every day and voluntary action has not taken us far enough. “To keep the 1.5C target alive, governments will need to regulate companies, not just to publish transition plans, but to have strict legal bite criteria for their credibility and pace.”
Given the inability of rich nations to live up to their economic promises, diplomats from other parts of the world have turned the credibility table towards donors.
India’s Foreign Minister Harsh Vardhan Shringla said it was time for rich nations to face the same credibility checks of finances that developing countries are expected to accept in terms of emission reductions.
“There are many commitments that have been made but not seen through,” he said. »The pressure on climate efforts should correspond to the pressure on climate financing. It is not enough just to set goals, there must also be a means to deliver. There should be tangible timelines, tangible monitoring. “