* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.The UK’s climate change plan can reduce 1% of global emissions – but the UK could reduce 15% of global emissions by taking a bigger step
Ed Davey is a British MP and former Secretary of State for Energy and Climate Change
The UK’s Committee on Climate Change has proposed a net zero carbon target by 2050 for the UK. This plan would reduce to zero the 1% of global carbon emissions that UK is directly responsible for and put the UK at the forefront of national decarbonisation.
But we can’t stop there. While the UK is directly responsible for 1% of global emissions, businesses responsible for more than 15% of global emissions are financed by the City of London.
If the UK wants to stop climate change our banks must stop funding climate change. It is nonsense to ask the people of this country to change and then to fail to require the City to do the same.
There is a lot of noise about green finance in the City but it’s not mainstream. We can’t tackle climate change by simply by adding some green finance into the existing mix. A diet only works if you start eating salad as well as giving up the doughnuts!
Just 100 fossil fuel companies have been responsible for 70% of emissions globally since 1988. These same companies allocate on average 1.3% of their total capital expenditure on green energy. This is reckless and totally out of step with a net zero goal.
We must ensure that the message becomes crystal clear: London is a capital for green finance AND you can’t fund the climate emergency here.
I recognise this is hugely challenging. Today 20% of the value of the London Stock Exchange, and by implication 20% of any pensions invested tracking it, is invested in high carbon and fossil fuel companies. To deliver the investment opportunities which substitute this we need to think big.
But now is the time and the opportunities exist. Tens of trillions of dollars of new green infrastructure alone is needed over the coming decades. That’s the future of finance, not the $12 trillion in fossil fuel assets at risk of becoming worthless.
We urgently need more political engagement to deliver the policies and solutions to decarbonise capitalism. We need to work with Mark Carney at the Bank of England, the Green Finance Institute and countless firms in the city – a coalition of the willing – who understand the urgency, the risks of inaction and the scale of the challenge to super charge green finance and wind down fossil fuels.
To achieve this requires cutting through the overly complex maze of financial regulations and regulators. We mustn’t allow this complexity to detract or distract from the core objective. If, together with the willing in the City, we can agree on a clear and steadfast principle - London is a capital for Green Finance AND you can’t fund the climate emergency here - then the strategy to deliver this will also become clear.
But we know that the city is driven by short term incentives out of line with the needs of our society. Last time a bubble burst in the City we got ten years of austerity. This time if a ‘carbon bubble’ bursts irreversible destruction of our planet is at stake as well as huge economic pain. In the case of the climate emergency, it is not the time for light of touch regulation and toothless regulators.
It’s now time for every pension fund to divest from any company which does not have a Paris aligned business plan. The London Stock Exchange should make an urgent plan to decarbonise in line with the Paris Agreement. Debt markets, our insurance companies, the Bank of England’s own balance sheet, every part of the City must decarbonise in line with the Paris agreement for the sake of the planet and our financial stability.
Now is the time for the City of London and Westminster to work together urgently to make this happen and to make it work for the people of the UK.
If London has enough courage to reinvent itself as the finance capital of the future, not the past, then we can punch well above our weight in the fight against climate change, impacting more than 15% of world emissions. The size of the prize is to divert trillions of dollars of wasted, high carbon capital to new green investments which can translate to green jobs and green growth in the UK and beyond.
Failure to act risks our planet and our pensions - our very survival. It’s an emergency. Failure is not an option. Let’s decarbonise capitalism.