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Picture: REUTERS/PETER ANDREWS
Picture: REUTERS/PETER ANDREWS

London — British finance minister Rishi Sunak told companies on Wednesday to set out plans by 2023 for a transition to a low-carbon economy, as part of steps to make Britain the world’s first net zero financial centre.

These plans must include targets to mitigate climate risk, interim goals between now and 2050, and measures to meet them, the finance ministry said.

However, there will be no mandatory commitments to net zero for firms or a ban on investments in carbon-intensive activities, the ministry said. Instead, investors will have to determine if companies’ plans are adequate or credible.

“There will be new requirements for UK financial institutions and listed companies to publish net zero transition plans that detail how they will adapt and decarbonise as the UK moves towards to a net zero economy by 2050,” the ministry said.

A new task force will offer a model for transition plans in an attempt to avoid “greenwashing”.

“While many firms were already taking this step, the new rules will ensure that the UK sets the pace internationally,” said Catherine McGuinness, policy chair at the City of London Corporation, the municipal authority for the Square Mile financial district.

Shaun Carazzo, a sustainable banking finance partner at consultants EY, said financial firms must now rapidly undergo a structured process to understand their current financed emissions, and develop appropriate ongoing targets and decarbonisation strategy to report on.

Britain will next year publish proposals setting out how the financial sector should transition to net zero by 2050.

In a speech to the UN COP26 climate conference in Glasgow, Sunak also welcomed the announcement from the Glasgow Financial Alliance for Net Zero that more than $130-trillion of private capital, equivalent to 40% of the world’s financial assets, will now be aligned to climate goals of limiting global warming to 1.5°C, the ministry said.

This would help “rewire the entire global financial system for net zero”, Sunak said.

The alliance is a grouping of more than 160 financial firms chaired by former Bank of England governor Mark Carney.

Britain will seek to address barriers to finance faced by developing countries with a series of new green initiatives, including £100m to help developing countries get funding for climate plans, the ministry added.

Sunak expects a $100bn climate finance target for the most vulnerable countries will be met by 2023, aided by a new capital markets mechanism to boost investment in clean energy like solar and wind power in developing countries.

Britain will feed returns from its investments in Climate Investment Funds — a project to help developing countries backed by lenders such as the World Bank — into the planned new mechanism for issuing billions of pounds of green bonds for clean energy projects, the ministry said.

Reuters

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