Carney urges investors and others to throw weight behind new COP26 action plan for finance

Guidance focuses on risk, reporting, returns and mobilisation, as UK looks set to issue green gilts

Mark Carney, the UN’s Special Envoy for Climate and Adviser to the UK Prime Minister for the COP26 climate negotiations, is calling on investors, governments and other actors in the financial chain to back a new action plan to mobilise capital for the net zero transition.  

The plan, published as part of a report by the Carney-led COP26 Private Finance Hub titled Building a Private Financial System for Net Zero, was presented at this week’s UK’s Green Horizon Summit, which kicked off today.

It outlines concrete measures that can be adopted immediately by regulators, companies, asset owners, banks, insurers and asset managers. The guidance focuses on four areas: risk, reporting, returns and mobilisation.

Carney, the former Governor of the Bank of England, is credited with putting climate risk on the global financial agenda through the Taskforce on Climate-Related Financial Disclosures (TCFD) and prudential risk work at the Bank of England. 

The report calls on investors to establish best practice/standards to assess the credibility of companies’ transition plans to net zero, and create a framework for measuring the alignment of their own investment portfolios and lending – in a consumer-friendly manner –  with net zero targets, and clear commitments to meet them. 

Countries, the report says, should start indicating how they will make climate-related financial reporting mandatory based on TCFD recommendations; while international standard setters can contribute to efforts to harmonise mandatory reporting rules across jurisdictions. Central banks, regulators and governments can then issue guidance to financial firms and corporates on climate-related reporting and implementing the TCFD recommendations, it continues.

In turn, stock exchanges and standard setters can develop TCFD-compliant listing guidance, with auditors considering climate-related risks and assumptions during the assurance of company reports and accounts.

This month was expected to mark the start of the COP26 negotiations, to be held in the UK. However, the summit has been pushed back to November 2021 in light of the current pandemic. The negotiations will be the most important since the Paris Agreement was established in 2015: governments are expected to ratchet up their ambitions on climate as part of the discussions, and the finance sector looks set to play a much bigger role than in previous negotiations – as indicated by Carney’s central role. 

Rhian-Mari Thomas, CEO of the UK’s Green Finance Institute, which is hosting the Green Horizon Summit, said that the events of 2020 had reinforced the need to “address the structural challenges facing our global economy, as well as speed the transition to a net zero world,” adding: “We need to develop standards and metrics which provide transparent financial disclosures, as well as create new markets and investment opportunities”.

UK Chancellor Rishi Sunak is expected to use the Summit to announce plans to issue the first green gilts. The UK Government has been under pressure for a number of number of years to issue a sovereign bond dedicated to green spending, but has so far resisted – partly on cost grounds. However, following a trend for COP hosts to launch green bonds as 'curtain raisers' to the annual climate summits (Chile and Poland have previously done so), the FT reports that the UK is likely to issue ahead of COP26.