Unprecedented amounts of private-sector finance from many of the world's richest economies have been committed at the UN Cop26 summit to funding a reduction in carbon emissions linked to human activity to zero.
During a day of talks dominated by climate finance issues, the most significant announcement was $130 trillion in funding over three decades through the Glasgow Financial Alliance for Net-Zero (GFANZ).
Banks and asset managers representing 40 per cent of the world’s financial assets, involving 450 firms across 45 countries, have pledged to meet the goals set out in the Paris climate agreement, said UN special envoy on climate Mark Carney, who is co-chairing the initiative with US businessman Michael Bloomberg.
“Ramping up adoption of clean energy and other sustainable infrastructure fast enough to avoid the worst impacts of climate change will require trillions of dollars in new investment – likely in the ballpark of $100 trillion,” the GFANZ co-chairs said.
“Most of that will have to come from the private sector, especially after the enormous toll that the pandemic has taken on governmental budgets.”
The focus at Cop26 switched on Wednesday to how finance from the state and private sectors, who are responsible for carrying out pledges to cut emissions and build the infrastructure needed, can be used to limit the rise in global temperatures and reduce environmentally harmful gas emissions.
With most national leaders having departed Scotland after pledging to reduce methane emissions and halt deforestation, their officials and delegates have been left to discuss means to scale-up global ambition to slow climate change.
‘Question of will’
British prime minister Boris Johnson said whether or not the summit is successful is a “question of will”.
He told the House of Commons that “we can take heart” from what has been achieved in Glasgow so far, but warned that whether or not the planet can avoid climate disaster “still hangs in the balance”.
“Far more must be done. Whether we can summon the collective wisdom and will to save ourselves from an avoidable disaster still hangs in the balance. We will press on with the hard work until the last hour.”
Speaking in Glasgow after British chancellor Rishi Sunak announced details of the GFANZ package, Mr Carney insisted the money “was ready” for the climate transition but it “desperately needed net-zero ready projects”.
“In finance, candidly, these issues were viewed as CSR [corporate social responsibility] not as strategic imperatives,” he said.
“Right here, right now is where private finance draws the line. The $130 trillion is more than is needed for the net-zero transition globally and a pool of that capital is being carved out for the transition to a low-carbon economy in emerging and developing countries.
“There’s a way to turn this into a very powerful virtuous circle. This is what we need to crack over the course of this year.”
Mr Sunak said the UK would play its part in “rewiring the entire global financial system for net zero”.
“Better and more consistent climate data. Sovereign green bonds. Mandatory sustainability disclosures. Proper climate risk surveillance. Stronger global reporting standards. All things we need to deliver and I’m proud that the UK is playing its part,” he said.
The UK had already made it mandatory for businesses to disclose climate-related financial information, while 35 other countries had signed up to do the same, Mr Sunak noted.
“Now I know that when people hear about global finance it can feel remote and abstract. But we’re not simply talking about numbers on a page. We’re talking about making a tangible difference to people’s lives.”
While there was a broad welcome for the announcement, some climate NGOs were less supportive.
‘Made a killing’
Dorothy Guerrero, head of policy at Global Justice Now, said many of the financial institutions involved had “made a killing from the climate and ecological crisis” and that observers should be “deeply suspicious of any attempt to spin them as the heroes”.
“Governments must regulate the process and lead the transition, instead of just handing it over the corporations,” she said. “A just transition empowers the people on the front line, who are currently paying the price for a crisis they didn’t cause. And handing over ever-more power to big business and financial institutions won’t cut it.”
Responding to Mr Sunak’s “finance day” speech, Christian Aid’s Jennifer Larbie said it was welcome that the chancellor had recognised London’s financial sector was critical “to any meaningful progress towards a global net zero” scenario.
“But this announcement does little to shift the dial now on the trillions still flowing into fossil fuel projects every day, with the deadliest of impacts borne by developing countries,” she said.
Meanwhile US climate envoy John Kerry told a meeting of mayors that emission reduction pledges made to date gave the world only a 60 per cent chance of capping global warming at 1.5 degrees - the key Paris accord target.
He said around 65 per cent of global GDP was now covered by implementable climate change plans.
There was, however, “something different” happening at Cop26, he said, pointing to a level of engagement by world leaders and a sense of urgency he had not seen at previous climate summits.
“There is something bigger, more engaged, more urgent in what is happening here than I have seen in at any other Cop, and I believe we are going to come up with record levels of ambition,” he told CNN.
At an event hosted by the think-tank Policy Exchange, Microsoft co-founder and philanthropist Bill Gates said he doubted that humankind would succeed in limiting global warming to 1.5 degrees.
