Rishi Sunak displayed a special green Cop26 Ministerial Box as he addressed today’s climate conference – as businesses challenged his plans for the City’s environment.
The Chancellor arrived in Glasgow together with Mark Carney (ex-Bank of England governor) ahead of his speech to delegates.
He unveiled plans to force hundreds of Britain’s biggest firms to go green to tackle climate change, with wide-ranging proposals to ‘rewire’ the economy towards reducing global warming.
The City of London will be able to redirect trillions of pounds of assets from carbon-intensive industries like oil and coal towards initiatives such as electric cars batteries.
However, it will also require UK-listed companies with a stock exchange to make proposals for ‘transition’ to net zero over the next decades. Firms will be evaluated annually against these published plans.
Those who fail to make enough progress or whose plans are deemed insufficient could face sanctions, including fines and even removal from the stock market.
Critics of Mr Sunak’s plans worry that they could lead to firms quitting London City to avoid red tape.
The Confederation of British Industry welcomed the idea with caution last night. It stated that business was already ‘upping their game’. But, the trade body cautioned ministers to work with international colleagues to develop ‘globally consistent’ rules that will prevent British-based companies from being penalised.
He stated that more public investment was needed to combat climate change, but that governments also require the support of the private sector.
Rishi Sunak made wide-ranging proposals to rewire the economy in order to reduce global warming
The Chancellor arrived in Glasgow together with Mark Carney (ex-Bank of England governor) ahead of his speech to delegates.
He stated that more public investment was needed to combat climate change, but that governments also require the support of the private sector.
As the conference’s finance session began, he stated that “public investment alone is not enough”, and that the second action was to mobilize private finance.
He announced that 40 percent of global assets are held by financial institutions. They will be aligned to the Paris Agreement’s 1.5C global warming limit.
Paris set the standard six years ago. He said that today in Glasgow, we are providing the investment necessary to achieve that ambition.
This move comes after years in uncertainty for the financial center in the wake Brexit and the upheaval caused Covid-19, which among others has led to millions of employees working remotely from home instead of in the heart of the City.
Ministers believe the scheme will encourage a rapid reduction in investment in polluting sectors and accelerate progress towards the Government’s goal to make the UK carbon neutral by 2050.
According to the Treasury, the plan would make the City “the first net zero-aligned financial center in the world”.
But the compulsion is likely to prove controversial with some, and could have big consequences for firms in sectors such as oil, gas and mining – BP, Shell and mining giants Rio Tinto and Glencore are among those listed in London.
Alasdair Haynes is a City veteran and chief executive of Aquis stock market exchange. But he warned that it was important that climate disclosures be included in company reports and accounts. Many fast-growing companies face high reporting costs, especially when you consider the details of what is required.
Today, Mr Sunak will announce the plans at the Cop26 climate summit. He will state that the UK, as one of the most important financial centers in the world, has a’responsibility for leading the way’ on this issue. A deal with 450 of the world’s biggest banks, pension funds and insurance firms will see almost £100billion worth of assets begin to ‘transition’ to lower carbon sectors.
Green groups have criticized the Chancellor over his approach to climate changes. Greta Thunberg claimed that his Budget decision not to tax domestic flights meant that it was not his top priority.
Firms are not required to go green at the moment. A recent study found that less than half of 100 companies on the FTSE 100 have made any commitment to moving to net zero.
The City of London will be able to redirect trillions of pounds of assets from carbon-intensive sectors such as oil and coal towards initiatives like electric car batteries (stock illustration).
A ‘transition planning taskforce’ was established under the new arrangement. The taskforce is composed of regulators, academic and industry leaders. The standards will be established for the plans. Sources claim that the quango was created to stop firms from ‘greenwashing” their records by making meaningless pledges. After consulting with business, the rules will go into effect in 2023.
Rain Newton Smith, CBI chief economist, said that although the moves were in the right direction, it was important they didn’t only apply in the UK.
She stated that policy makers must follow up on these recommendations to create globally consistent climate and sustainability disclosure guidelines.
Sam Alvis of the Green Alliance stated that ‘trillions’ of dollars still flow to fossil fuels every single day and voluntary measures have not taken us far enough. He said that the new system must have’strict criteria with legal bite.
The Glasgow Financial Alliance for Net Zero is a new arrangement that will see 40 percent of global investment be accounted for by firms who sign up for net zero goals.