Add up the assets of 450 of the biggest financial companies spread across 45 countries and what do you get? A very big number for Rishi Sunak to boast about, that’s what. About $130tn (£95tn) to be precise.
The chancellor, who is kicking off tomorrow’s finance day at the Cop26 conference, will say that 40% of the world’s financial assets is now owned by institutions aligned with the Paris 2015 goal of limiting the increase in global temperature to no more than 1.5C of pre-industrial levels.
That may sound as if $130tn, equivalent to one-and-a-half times annual global output, is going to be unleashed to green the economy, but that is not remotely the case.
What Sunak will be saying is that the 450 firms, including investment managers such as BlackRock and banks such as HSBC, have signed up to climate goals under the Glasgow Financial Alliance for Net Zero. It doesn’t mean that the $130tn will be spent on net carbon zero projects and, indeed, does not prevent the continued investment in fossil fuels.
The chancellor is optimistic that the commitments by big finance could create a huge pool of cash to fund the net zero transition but “could” is not the same as “will”. It is unlikely that more than a fraction of the $130tn will be invested in green projects, in the short term at least.
Sunak will also announce that within the next year or so UK financial institutions and quoted companies will have to publish net zero transition plans outlining how they will decarbonise their activities. Setting an example is one way the government can make a difference to the fight against the climate crisis, because while the UK accounts for only 1% of global emissions it has one of the world’s biggest financial sectors.
This doesn’t mean investments in carbon-intensive activities will not be allowed, but the government is setting up a taskforce made of figures from industry, academia, regulatory bodies and civil society groups, which will establish a science-based “gold standard” for transition plans to minimise the risk of “greenwashing”. This seems a sensible precaution.
