Day three of COP26 was ‘Finance Day.’ All eyes were on how governments, central banks and private capital can coordinate across borders to get funding where it’s needed to help cut the amount of warming greenhouse gases being released around the world.
But what commitments were made, and how do they stack up against what’s really needed to halt the climate crisis? We round up our top three takeaways from the day.
1. UK vows to become world’s first net-zero aligned financial centre
The UK will become “the world’s first net zero-aligned financial centre,” announced chancellor Rishi Sunak.
Under the new rules, British financial institutions will be required to disclose their climate impacts. However, going net zero will not be mandatory. Campaigners have warned that Sunak’s “landmark” plan falls far short of what is needed to beat the climate crisis and risks amounting to “greenwash” for a sector that has profited hugely from decades of pollution.
Greenpeace UK said Sunak’s plan is simply “a marketing slogan” in place of the transformative action that is desperately needed for the finance sector. Its head of politics, Rebecca Newsom, said: “These new rules seem to allow plenty of wriggle room for financial institutions to continue with business as usual, rather than ‘rewiring’ the system as the chancellor claims. The chancellor is once again falling short of what the climate emergency requires.”
2. World’s biggest financial players pledge trillions
Around 450 financial institutions with more than 40 per cent of the world’s assets on their books have signed up to the Glasgow Financial Alliance for Net Zero (Gfanz), led by former Bank of England governor Mark Carney.
The firms control around $130 trillion (£95 trillion) in assets – a “huge pool of cash” that the UK government says could fund the transition to net zero. This includes the move away from coal, the shift to electric cars and the planting of more trees.
First announced in April, Gfanz now covers more than 450 firms from 45 countries across six continents and from all parts of the financial industry. Bosses from NatWest Aviva the London Stock Exchange and HSBC are among the 20 members of the Gfanz Principals Group, which sets the alliance’s direction.
Gfanz said that 29 of its asset owners plan to reduce emissions from their investments by 25 per cent to 30 per cent by 2025. It added that 43 asset managers have published targets for 2030 or sooner.
However, green groups have questioned whether the Gfanz announcement could go further. Jeanne Martin, senior manager at responsible investment charity ShareAction, said: “These financial institutions have all committed to reaching net-zero, but dig into the numbers and you see that they are not making this commitment for all of their assets.”
3. Meeting the $100 billion climate finance pledge – three years late
Developed countries reiterated their pledge to provide climate funding for the poorer, more vulnerable countries that are likely to experience the effects of climate change ‘first and hardest’.
“We’re going to meet the target to provide $100 billion (£73 billion) of climate finance to developing countries,” said Sunak.
However, this funding target was due to be met in 2020 and now it is expected in 2023 – three years late. “While we know we are not yet meeting it soon enough, we will work closely with developing countries to do more and to reach the target sooner,” he added.
Sunak also said that the UK will commit £100 million to the Task Force on Access to Climate Finance, making it “quicker and easier for developing countries to access the finance they need.”
Members of the Least Developed Countries (LDC) Group told COP26 that with climate change and the COVID-19 pandemic, access to funding was a “huge issue.” Made up of 46 countries with one billion people, LDCs are responsible for less than one per cent of the world’s emissions. Yet they suffer disproportionally from the effects of climate change.