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Reaction streams in after Rishi Sunak's net zero financial centre announcement

Reaction streams in after Rishi Sunak's net zero financial centre announcement | Insurance Business UK

Reaction streams in after Rishi Sunak's net zero financial centre announcement

“The UK will go further and become the first-ever ‘net zero-aligned financial centre’.”

That was the pronouncement made by Chancellor of the Exchequer Rishi Sunak in his speech yesterday (November 03) at the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow. In his address, Sunak pointed to the plan to ‘rewire’ the global financial system for net zero, with the UK leading the charge.

He declared: “We’ve already made it mandatory for businesses to disclose climate-related financial information, with 35 other countries signing up to do the same. Today, I’m announcing that the UK will go further and become the first-ever ‘net zero-aligned financial centre’.

“This means we are going to move towards making it mandatory for firms to publish a clear, deliverable plan… setting out how they will decarbonise and transition to net zero, with an independent taskforce to define what’s required.”

The Member of Parliament for Richmond (Yorks) stressed that it’s not simply about numbers on a page but about making a tangible difference to people’s lives.

Read more: LIIBA: ‘London’s insurance brokers can make net zero happen’

Commenting on the announcement, London & International Insurance Brokers’ Association (LIIBA) chief executive Christopher Croft stated: “LIIBA members share the UK government’s sense of urgency in this matter. London market brokers are at the forefront of the drive to achieve net zero by 2050, both in terms of their clients and their own organisations.

“The insurance industry and brokers, in particular, have a key role to play in helping businesses transition to net zero because of their unique position in the economy.”

Dr Frederik Dahlmann, associate professor of sustainability at Warwick Business School, also offered insights.

“The Treasury’s plans for financial institutions and companies with shares listed on the London Stock Exchange to publish net zero transition plans for review by a wide range of stakeholders present clear benefits and risks,” he commented.

“On the plus side,” noted Dahlmann, “it raises transparency and accountability about how exactly companies are planning to reduce their carbon footprints in line with the Paris Agreement. Many companies are already setting ambitious targets, but they are often less clear on how exactly they should be achieved.

“On the other hand, if the publication of these plans is not mandatory, companies will end up considering primarily public reputation benefits and commercial risk impacts from disclosure, rather than dedicate time and effort to plan their net zero strategies with the necessary detail.”

Read more: Revealed: ‘Leaders and laggards’ in fossil fuel underwriting and investing

In Steve Trent’s view, meanwhile, companies need to be ordered to fully stop financing fossil fuels. Trent is the founder and chief executive of the Environmental Justice Foundation, a charity registered in England and Wales working to protect the environment and defend human rights.

He asserted: “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,” continued Trent. “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.”

Meanwhile, separately, the University of Cambridge Institute for Sustainability Leadership has published a new report outlining recommendations to put the insurance industry ‘at the heart’ of climate resilience solutions. Risk sharing in the Climate Emergency: Regulation for a resilient, net-zero, just transition was prepared with the support of law firm Clyde & Co.