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The UK has developed a climate action agenda specifically for private finance as part of its chairmanship, along with Italy, of this year’s UN climate change summit, with an outline of the strategy welcomed yesterday to provide clear direction.
The agenda was unveiled at an event in London by Mark Carney, who will step down as Governor of the Bank of England next month to focus on his roles as UN Special Envoy for the climate action and finance, and financial advisor of COP26 to UK Prime Minister Boris. Johnson.
In a speech, he said private finance would have a critical role to play in a successful transition to a net zero carbon economy, and that “with the UK presidency of COP26, in partnership with Italy, the world is watching. “.
The aim of the private finance work for COP26, which will take place in Scotland in November, was to “ensure that every financial decision takes into account climate change”, he said.
It would take private sector action, but “we will work with you,” and there would be needed action from regulators and governments to catalyze the efforts of the private financial sector.
Three pins
“On the road to Glasgow, we will focus on the three Rs – reporting, risk management and return – to help unlock the private financial flows that are critical to the transition,” said Carney.
He called on the private financial sector to “help refine and implement” disclosure based on the Climate-Related Financial Disclosures Working Group (TCFD) framework. At the same time, the British presidency of COP26 “would work with the authorities to embark on paths aimed at making climate reports mandatory”.
In the meantime, private financial institutions have been encouraged to help revise the current TCFD framework to allow for any improvements before disclosures become mandatory, and to require companies to make TCFD compliant disclosures.
Pension funds were specifically mentioned in the context of the net zero goal, with Carney saying they, along with others in the private sector, “will increasingly need to develop and disclose their transition plans.”
He said the UK Presidency of COP26 would seek to build on existing work and networks, such as the Net Zero Asset Owner Alliance, Climate Action 100+ and the Principles for Responsible Investment (PRI), “to build a grand coalition of asset owners and asset managers who expect their portfolio companies to become aligned with net zero ”.
PRI CEO Fiona Reynolds said she was “delighted that finance is playing a key role at COP26 in Glasgow”.
“This is the first time that a COP host government fully recognizes the essential role that finance must play alongside state actors and seeks to prioritize its contribution,” she said.
“The COP26 private finance agenda is a clear call to action for the finance sector, setting the direction for a number of initiatives that have already shifted from the margins to mainstream in our industry since the COP. 21 “
Vanessa Bingle, Senior Director, Alpha FMC
Vanessa Bingle, senior director of asset management consultancy Alpha FMC, said the COP26 private finance program was “a clear call to action for the financial sector, setting the direction for a number of initiatives that have already moved from the margins to mainstream in our industry. since COP 21 ”.
She said the announcement “goes straight to the heart of how asset managers do business and requires companies to fully embed environmental considerations at the heart of their processes, data, technology and people development. The scale of change is significant and asset managers need to make concrete plans to keep pace ”.
Gill Lofts, head of sustainable finance at EY, told IPE that removing private finance as a separate workflow was “absolutely the right thing to do” and that Carney’s speech and the document presenting the associated strategy “Present very well some major steps to take over the next nine months to get things done”.
And there was a lot of work to be done, she said.
“The details of what companies – both public and private – need to do to build on their current sustainability measures or how they will report and measure are not yet clear.
“Banks, asset managers and insurers need to work closely with government and policy makers on this critical and complex issue. They will eagerly await more information before they can act with real meaning and integrate climate change into every financial decision they make. “
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