Negotiators who have gathered at the 26th United Nations Climate Change Conference of the Parties, or COP 26, to find ways to ensure the world meets its climate goals have been invited to trust the banks and global investors to save the planet.
In a move that has been met with skepticism from climate activists, a coalition of banks, insurance companies and investment firms has committed $100 trillion of private capital to help the world reach net zero carbon emissions targets by 2050. .
The idea is that these big spenders, including some of the biggest international banks, will direct their clients’ money towards investments that save the planet and avoid fossil fuels that contribute to global warming.
So far, 450 financial institutions, spread across 45 countries, have signed up to the Glasgow Finance Alliance for Net Zero, a coalition convened by the United Nations in April under the leadership of Mark Carney, UN Special Envoy on Climate Action. and finances.
Carney, the former Canadian head of the UK central bank, said: “We now have the essential plumbing to move climate change from the margins to the forefront of finance so that every financial decision takes climate change into account.”
The theory behind the idea is that governments alone do not have the resources to finance the energy transition and that private money is vital to ensure its success.
However, the Glasgow Finance Alliance for Net Zero has come under fire from climate activists because it allows the loophole of continuing to fund fossil fuel extraction during the transition.
Carney thinks big investors will have an interest in financing a clean energy transformation because that’s where future profits lie. He said there was no reason investors backing low-carbon projects should settle for lower returns.
Despite this lure of future earnings, it was reported before COP 26 that the big banks were resisting any commitment to end financing for all new oil, gas and coal exploration projects this year.
Putting big investors in charge of saving the planet may seem like the equivalent of putting a fox in charge of the chicken coop.
Anyone who lived through the 2008 financial crisis can remember that it was triggered by reckless mortgage investments by big banks in search of easy profits. It was left to governments to use taxpayers’ money to pull the global financial system back from the brink.
Left to its own devices, investment money inevitably seeks out the most profitable projects, regardless of the implications for society at large. Big Tobacco and Big Oil are among the sectors that have sought to maximize their profits while resisting pressure to limit the damage they cause.
Developed capitalist societies have also tended to prioritize the concept of shareholder value, in which the return on investment is considered more important than the goods and services a given company produces or the way it treats its employees and customers. .
That begs the question of whether the world can trust the goodwill of asset managers and big corporations to do the right thing when it comes to the climate problem, or whether legislation will be required instead.
Carney acknowledged before COP 26 that a privately funded green transition plan would also require governments to implement clear and credible net-zero emissions policies.
“This includes carbon pricing, internal combustion vehicle bans, national targets to phase out fossil fuel subsidies, and mandatory climate-related financial disclosures,” he wrote in an op-ed in the Financial Times.
He invited investors to assess who was part of the proposed $100 trillion green transition revolution and ask if that includes their bank, insurer, mutual fund manager or pension fund. Her comments were an invitation to investors themselves for banks and asset managers to keep their commitments.
Investors and the corporations they finance have had to burnish their green credentials in recent years, reflecting pressure from ethical investors demanding social benefits as well as a return on their money.
Business leaders and world leaders have come to Glasgow for COP 26 in part to convince customers and investors that they are doing their bit for the planet.
Some climate activists have dismissed such tactics as “greenwashing,” a phenomenon related more to image building than genuine climate action. Activists question the credibility of the banks that continue to finance fossil fuels.
While it is not yet known whether COP 26 will be deemed a success, Swedish activist Greta Thunberg and her supporters have already declared it a failure. Perhaps with banks in mind, she declared: “It should be obvious that we cannot solve the crisis by the same methods that got us into it in the first place.”
The author is a senior media consultant for China Daily UK. Opinions do not necessarily reflect those of China Daily.