Rishi Sunak just announced plans to make British or UK-listed financial companies publish plans on how they will transition to net zero. He’s setting up an independent task force to define what a proper transition looks like. It might sound good, but unfortunately it’s all bark, no bite.
There’s tonnes of wiggle room to let financial companies continue with ‘business as usual’, and there’s no clear punishment for companies not following the plans they publish. This was a huge chance for Rishi Sunak to “re-wire finance” and have a huge impact on the climate, but it simply has no teeth. It’s nowhere near what’s needed to keep warming under 1.5C
“The world’s first net zero aligned financial centre would be one in which financial institutions and companies are required by law at the outset to bring their lending and investments in line with the global goal to limit warming to 1.5C. Instead, these new rules seem to allow plenty of wiggle room for financial institutions to continue with business as usual, rather than ‘rewiring’ the system as the chancellor claims.
“Transition pathways must be genuinely science-based, not determined by what industry participants in cosy alliances consider best practice at any given time. The chancellor is once again falling short of what the climate emergency requires.”
Here’s what’s missing from the announcement:
The timeline for these announcements is vital – they need to be implemented with an urgency that matches the situation we’re in. In 2019 the UK was responsible for financing 805m tonnes of carbon: if the City of London were a country it would be the 9th largest carbon emitter.
When will banks be required to stop funding fossil fuels? When is the exact time that insurers should step out of underwriting new fossil fuel projects? By when will we have our pensions free from oil & gas companies who do not comply with the transition requirements?
If these criteria are to be worked out by the government taskforce, when will this taskforce deliver its first gold standards? And while those standards are being worked out, shouldn’t the Bank of England set the highest risk weightings for new fossil fuel and deforestation projects which are already misaligned with 1.5C targets?
Science based targets:
The rules allow companies to set ‘gold standards’. But companies shouldn’t be allowed to decide. The science is already very clear on what needs to keep warming under 1.5C. Allowing companies to set a ‘gold standard’ is letting them mark their own homework. The independent agency should be focussed on what the science is saying, not on what the best examples are.
Nothing about following the plans:
Today’s announcements require companies to lay out their transition plans. It doesn’t say anything about the companies having to then follow those plans. So it’s just an exercise in disclosure. There’s no consequences for any company not following through on their plan.
There should be a framework for punishing dirty lending!