Preparing for UN COP26

The 26th United Nations Climate Change Conference, also known as COP26, will be held in Glasgow in November 2021 and under the presidency of the UK.  Alok Sharma, the ex Secretary of State for Business, Energy and Industrial Strategy, will lead the event for the UK and the former governor of the Bank of England, Mark Carny has been appointed as the finance advisor.

This conference is the first time that member governments are expected to agree to new objectives since the Paris Agreement (COP21).  In anticipation, the past year has seen a raft of new ‘green’ initiative launches including several banks announcing climate-change products and revisiting lending standards.  Lloyds and NatWest have both pledged to halve the emissions linked to their loan books.  Barclays said a new “carbon limit” on the amount of activity it finances will force it to lower emissions, despite its refusal to halt lending to fossil fuel businesses completely.  NatWest launched the UK’s first “green mortgage” in November 2020, offering lower interest rates to borrowers if they bought a more energy-efficient home.  And Oxbury Bank will open the first “carbon offset savings account”.

This month, Coutts announced its decision to join the Net Zero Asset Managers initiative, committing to achieving Net Zero across all our investments by 2050.  There are now around 87 asset managers that are signatories to the initiative, accounting for nearly $15 trillion in AUM.  The signatories commit to support the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with efforts to limit global warming to 1.5°C.  They also commit to support investing aligned with net zero emissions by 2050 or sooner.  Another signatory is Schroders, who in January 2020 wrote to the UK’s largest companies asking them to publish detailed and fully costed transition plans on climate change.  Both firms are also part of an investor initiative to ensure the largest corporate greenhouse gas producers take essential action called Climate Action 100+.

Though a recent study commissioned by Greenpeace and WWF, reported that major UK banks and asset managers were responsible for 805m tonnes of emissions in 2019.  The figures are based on loans and investments in areas such as energy and industry, and from mortgages.  This means that if the financial sector were a country, it would be the 9th largest carbon emitter in the world.  The green activists suggest that the pledges don’t go far enough and are seen as “greenwashing”.  And are calling on the government to regulate the financial sector in the same way as other high carbon industries.

Alok Sharma’s recent article for Bloomberg urges financial institutions to do more to fight climate change.  He asks for more financial firms to join the Glasgow Financial Alliance for Net Zero (GFANZ), and for new finance to flow to developing countries and emerging markets.  He is looking for a concerted step away from coal and for climate related reporting in line with the Task Force on Climate-Related Financial Disclosures.  Finally he asked for financial decisions to consider and contribute to the restoration of the natural world.

“While governments can legislate to mandate or encourage climate-friendly strategies, it is increasingly clear that harnessing the momentum and making green choices makes business sense.”  Alok Sharma, President-designate of the 2021 United Nations Climate Change Conference.