UK government gives financial institutions ready-made loopholes to use in climate plans
Today, UK finance minister Rishi Sunak told companies to publish plans by 2023 for a transition to a low-carbon economy. At the same time, the Glasgow Financial Alliance for Net Zero (GFANZ) – made up of financial firms including banks, insurers, pension funds, stock exchanges, audit firms and others – stated that over US$ 130 trillion of private capital is now committed to transforming the economy to net zero carbon. These happy headlines conceal a wealth of loopholes and opportunities for backsliding that we cannot afford if we are to avoid climate breakdown.
In the five years since the Paris agreement, the world’s top 60 banks have poured US$ 3.8 trillion into climate-damaging fossil fuels, so it is absolutely crucial that they right this wrong and play their part in the transformation to a sustainable world.
Sunak’s net-zero disclosure rules for financial institutions are a first step towards turning off the tap on climate chaos, but they contain some deeply worrying loopholes.
While it seems laudable that the plans submitted must include targets to mitigate climate risk, interim goals, and measures to meet them, this sadly means nothing because there is no obligation to achieve net-zero, and no ban on investing in carbon-heavy activities.
We need rules which force financial institutions to stop funding fossil fuels completely, we can't keep kicking the can down the road on fossil fuel divestment. It's not enough to publish ‘net zero by 2050’ plans if those plans rely on creative carbon accounting over real decarbonisation across the whole of our economies.
In addition, governments need to pull the plug immediately on subsidies for fossil fuels. This toxic industry is currently propped up by government funding to the tune of US$ 11 million every minute, over 1.3 billion per day. If governments and banks continue to invest in this planet-destroying industry, these happy headlines mean absolutely nothing.
Net zero pledges mean nothing without fossil fuel divestment. Time for financial institutions to put their money where their mouth is and stop funding climate destroying fossil fuels.