"An existential risk which could turn into the greatest commercial opportunity of all time" was how the outgoing Bank of England Governor Mark Carney challenged high-level financiers and politicians to rapidly achieve "a whole economy transition" so as to successfully deliver on the urgent need for global climate change action.
Mr Carney, who has become Finance Adviser to the Prime Minister for COP 26 (the next UN Climate Change conference in Glasgow in November) as well as the UN Secretary-General's Special Envoy on Climate Finance and Action, was addressing last Thursday's launch of UK's "UN Climate Summit Finance Agenda" at the City of London's 12th century Guildhall.
"Given the scale of the climate challenge and the rising expectations of our citizens, 2020 must be a year of climate action where everybody's in, and that includes the world's leading financial centre. To identify the largest opportunities and to manage the associated risks, disclosures of climate risk must become comprehensive, climate risk management must be transformed, and investing for a net zero world must go mainstream."
The European Central Bank President, Christine Lagarde, said that "central banks need to devote greater attention to understanding the impact of climate change, including its implications for inflation dynamics. At the ECB, the ongoing review of our monetary policy strategy creates an opportunity to reflect on how to address sustainability considerations within our monetary policy framework".
"Disregarding the implications of climate change can generate significant risks for the financial sector", she warned. "Total insurance losses for weather-related events reached 0.1% of GDP in 2018, with total economic losses approximately double that amount. The number of catastrophes caused by natural hazards increased from 249 in 1980 to 820 in 2019, peaking at 848 in 2018. Adjusting for inflation, overall economic losses increased from around $60 billion in 1980, to $150 billion in 2019, with a peak of $350 billion in 2018. Achieving the transition almost certainly requires intervention by public authorities through regulation and taxation."
"Early and coordinated action can help deliver a smooth transition for the economy. The financial sector will be pivotal in mobilising the necessary financial resources for the transition and in helping our economies to cope through adaptation and mitigation. It is vital that it provides finance of sufficient quantity and quality for the task. A common approach is needed to mobilise global funding for the transition, while at the same time remaining vigilant against attempts to greenwash."
Alok Sharma, the recently appointed UK Secretary of State for Business, Energy and Industrial Strategy and new COP 26 president after the sacking of Claire O'Neill MP said that "in Glasgow the world must ramp up momentum towards a zero-carbon economy. To achieve this, all countries must commit to significant further cuts to carbon emissions by 2030, and to reach net zero as soon as possible."
118 nations and over 80 organisations supported UK's launch at the UN General Assembly of a Call for Action on Adaptation and Resilience. Nature-based solutions and seizing the 'massive opportunities' of cheaper renewable energies and storage must be seized and progress to zero-emission transport systems speeded up. "To make this all possible, unleashing the finance which will power the shift to a zero-carbon economy. The OECD estimates that we will need nearly $7 trn a year up to 2030 to meet the Paris Agreement (on climate change), as well the (UN 2030 sustainable) development goals. Much of this funding needs to come from the private sector. As part of COP26, we will be supporting private sector coalitions to do even more, sooner, helping them look at the climate impacts of asset portfolios and loan books."
Earlier this week, a broad UK civil society coalition launched its 'Glasgow Action Plan' which while supporting a number of Mr Sharma's proposals also called for an immediate stop to UK support for fossil fuel developments abroad while reviewing and phasing out related investments by 2021, support for a new global public finance goal for climate change adaptation and new finance sources for climate change related loss and damage in poor countries including debt cancellation in times of crisis. New legislation was also needed to effectively put the nation on track to achieving net zero and eliminating greenhouse gas emissions as soon as possible.