A financial coalition headed up in part by former Bank of England Governor Mark Carney has pledged to direct a stunning $130 trillion in capital toward achieving a 'net zero' global economy by 2050.
The 'historic' climate pledge' came from the Glasgow Financial Alliance for Net Zero (GFANZ) during COP26's Finance Day.
GFANZ was launched by Carney earlier this year and today announced that it now involved more than 450 financial firms in nearly four dozen countries. Together they comprise the world's biggest financial players and control around 40% of global assets.
Joining Carney in the coalition's leadership are former New York City mayor Michael Bloomberg, former Chair of the US Securities and Exchange Commission Mary Shapiro, and current UK High Level Climate Action Champion Nigel Topping.
GFANZ says its collective of 'banks, insurers, pension funds, asset managers, export credit agencies, stock exchanges, credit rating agencies, index providers and audit firms' has the resources to help world economies transition to net zero over the next three decades. GFANZ defines 'net zero' as 'not adding to the amount of greenhouse gases in the atmosphere [by] reducing emissions as much as possible and balancing out any that remain by removing an equivalent amount'.
$100-trillion-plus price tag
Private capital's involvement in climate finance is critical to global efforts to avoid catastrophic climate change, says the US Department of Treasury, which estimates that $100 trillion will be needed – far more than the hundreds of billions pledged by governments.
Speaking at COP26 today, US Treasury Secretary Janet Yellen said: 'As big as the public sector effort is across all our countries, the $100-trillion-plus price tag to address climate change globally is far bigger. The private sector is ready to supply the financing to set us on a course to avoid the worst effects of climate change.'
As well as aiming to convert the global economy to clean energy, GFANZ says it is committed to achieving 'high ambition, science-based targets' and to help the world meet the 2030 goal of limiting global warming to 1.5ºC – a key facet of the 2015 Paris Agreement and a major focus of COP26 discussions.
'We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance' – Mark Carney
'We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account,' Mark Carney said. 'Only this mainstream focus can finance the estimated $100 trillion of investment needed over the next three decades for a clean energy future.'
Nigel Topping added: 'To keep 1.5°C within reach, we need the owners, managers, lenders, and underwriters of capital to realign their business models with the climate science.
'The core of the financial system is now publicly committed to that task. And it will have a ripple effect across the global economy. Now we need governments to help get the job done, by setting the ambitious policies that can unlock, accelerate and help direct the investment to where it’s needed most.'
Missing the point?
However, campaigners said GFANZ had 'missed the point' on fossil fuels. NGO Reclaim Finance criticised GFANZ for failing to mandate a halt to investments in fossil fuel expansion — a red line drawn by the International Energy Agency if global heating is to stay under 1.5 degrees Celsius.
To read more about the coalition and its aims, visit gfanzero.com
Other takeaways from Finance Day
World's first net-zero aligned financial centre – UK Chancellor Rishi Sunak said UK firms would be required to demonstrate they intend to meet climate change targets, with public plans on how those goals would be achieved to be published by 2023. The move, which also applies to companies with shares listed on the London Stock Exchange, is part of plans to make the UK 'the world’s first net-zero aligned financial centre'. However, while financial institutions would be required to disclose their climate impacts, going net-zero would not be mandatory -- sparking immediate criticism from campaigners. 'These new rules seem to allow plenty of wiggle room for financial institutions to continue with business as usual,' Greenpeace UK's Rebecca Newsom. Mark Campanale, founder of Carbon Tracker Initiative and an advisor to FaithInvest, praised the ambition of the plans, but said details of how it would work were still unclear. 'None of the financial assets announced are currently aligned with net-zero and no group of companies can say they are meeting the Paris target by continuing to invest in fossil fuels, so that needs to change considerably before London can be lauded as the world's first net-zero financial centre and a model for the world,' he told the BBC.
Climate funding for most vulnerable – Nation states reiterated their pledge to provide $100 billion of climate funding for developing countries – three years later than originally planned. The pledge was due to be met by 2020 and now is set for 2023. 'We're going to meet the target to provide $100 billion of climate finance to developing countries," said UK Chancellor Rishi Sunak. '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.'
Extra funding for access to climage finance – Sunak also said the UK would commit £100 million to the Task Force on Access to Climate Finance to make it "quicker and easier for developing countries to access the finance they need. The pledge came as members of the Least Developed Countries Group told COP26 today that with climate change and the COVID-19 pandemic, access to funding was a 'huge issue'.
Poacher turned game keeper? – Meanwhile, climate activists called for scrutiny of investors' motives, warning that the same financial players that profited from fossil fuel were now posing as green champions.
Faith-based finance – FaithInvest held a round table looking at various strategies to mobilise faith-based capital to finance a Just Transition. FaithInvest CEO Martin Palmer said: 'Listening to the fusion between hard-nosed economics and the values of the faiths, and the scale of the task around the SDGs, around climate change, around biodiversity, around sustainability, you could have come away from a meeting like this – as I think many will come away from the COP feeling 'this is just too big, it's beyond us, we've failed'. Here, there was a sense of 'of course we can do this – but let's make sure we do it really well. And that for me was really exciting.' Look out for a fuller report on our round table deliberations later.