UK government urges private finance firms to make net zero pledge

Finance is a central theme in the race to net zero

The UK government is calling on privately owned financial institutions to commit to a net-zero carbon future.

Speaking at the Green Horizon Summit in London last week, UK business secretary Alok Sharma said he wants companies to meet the target by 2050 at the latest and also publish a clear plan on how they will achieve it.

Sharma, who has also been named president of the United Nations Climate Change Conference (COP26), said: “There is an urgent need to raise global ambition in reducing our emissions, building climate resilience and reaching a net-zero global economy and finance has a pivotal role to play.

“If we are to increase green global investment from the billions to the trillions, all finance must align with the Paris Agreement.”

Sharma also urged more companies to disclose climate risk in their financial reporting ahead of COP26 summit next year.

The summit, hosted by the UK, had originally been scheduled for this November but was delayed due to the coronavirus pandemic.

“We are calling on countries to come forward with new commitments on finance, so that together, we can meet and exceed the goal of mobilising $100bn a year for developing countries,” Sharma said.

Members of the UN-backed Net-Zero Asset Owner Alliance, including Aviva, Allianz and AXA, now represent over $5tn in assets, up $1tn from last year.

M&G has said it will become net zero by 2050 while HSBC, JP Morgan, and Morgan Stanley have also made similar commitments. The BT Pension Scheme has also announced it will reach net zero by 2035.

Sharma said how the companies responded in the next decade would be absolutely critical to reducing the impact of climate change. He urged “rapid decarbonisation and increased resilience”.

“To remain in line with the Paris Agreement, we must reduce our emissions up to five times quicker over the next 10 years than we have over the past 20,” said Sharma. “We must finance the transition to net zero before it is too late. That is why we are making international finance a central theme of our COP presidency.”

A recent review by the UK’s Financial Reporting Council said corporate reporting on climate change needs to improve to meet investor expectations. The standards body said climate change must be integrated into decision-making now if it is to be tackled in an orderly way.