UK green investors can drive net zero

He might be Cana­di­an, but Mark Car­ney believes his adopt­ed coun­try has a unique oppor­tu­ni­ty to lead the glob­al finan­cial sec­tor to chal­lenge cli­mate change.

“The UK is very good at finan­cial inno­va­tion,” says the for­mer Bank of Eng­land gov­er­nor, who is now the prime minister’s finance advis­er for the Unit­ed Nations Cli­mate Change Con­fer­ence (COP26) and UN spe­cial envoy for cli­mate action.

“When it gets behind what soci­ety wants and when it’s aligned, it can do extra­or­di­nary things. The UK is the leader in many respects among the 125 coun­tries that are look­ing to tran­si­tion to net zero. Finance will play a deci­sive role in that.”

Car­ney is set­ting out a chal­lenge to pen­sion funds. “With peo­ple increas­ing­ly demand­ing cli­mate action, those who invest our sav­ings should dis­close how close­ly their port­fo­lios are aligned with the tran­si­tion to net zero,” he says.

“Some of the world’s largest insur­ers, pen­sion funds and asset own­ers, with over $5 tril­lion in assets under man­age­ment, have com­mit­ted to man­age down the car­bon foot­prints of their invest­ments by up to 29 per cent, prefer­ably on a scope-three basis [includ­ing all indi­rect green­house gas emis­sions] by 2025 and to be at net zero by 2050. This met­rics-based approach will like­ly become increas­ing­ly com­mon.”

Investing pensions to do good

Car­ney is a sup­port­er of Make My Mon­ey Mat­ter. The cam­paign is aimed at cap­i­tal­is­ing on the UK’s tal­ent for devel­op­ing new finance ini­tia­tives to help those who are con­tribut­ing to a pen­sion ensure their mon­ey is more like­ly to be invest­ed in com­pa­nies and activ­i­ties that pre­vent cli­mate change rather than cause it.

“Investors must pro­vide trans­par­ent and read­i­ly under­stand­able answers when their clients ask whether their sav­ings are being invest­ed in line with the tran­si­tion to net zero. The chal­lenge to the finan­cial indus­try is to ‘make a mean­ing­ful met­ric’ so peo­ple can ‘make their mon­ey mat­ter’,” he says.

By align­ing the finance sec­tor with society’s val­ues, Make My Mon­ey Mat­ter aims to sup­port the tran­si­tion of the whole econ­o­my towards net zero. “This could turn the exis­ten­tial risks from cli­mate change into the great­est com­mer­cial oppor­tu­ni­ty of our time,” says Car­ney. “Pri­vate finance, includ­ing pen­sion funds, will pro­vide the $3.5 tril­lion need­ed annu­al­ly for invest­ments in sus­tain­able infra­struc­ture and fund the inno­va­tion and re-engi­neer­ing of busi­ness in every sec­tor of the econ­o­my.

“Make My Mon­ey Mat­ter and our work for COP26 will help investors dis­close how their clients’ mon­ey is sup­port­ing these invest­ment needs, so peo­ple can decide whether their pri­or­i­ties are being met. This will help deliv­er the world our cit­i­zens demand and future gen­er­a­tions deserve.”

Accord­ing to polling by Make My Mon­ey Mat­ter, whose founders are film direc­tor and co-founder of Com­ic Relief, Richard Cur­tis, and Jo Cor­lett, for­mer advis­er to the prime min­is­ter and the Depart­ment for Inter­na­tion­al Devel­op­ment, more than half (57 per cent) of respon­dents want to see their pen­sions go towards build­ing a bet­ter future for peo­ple and the plan­et post-coro­n­avirus.

Along­side this, 52 per cent want their pen­sions to be part of the solu­tion to com­bat­ing cli­mate change. How­ev­er, near­ly three quar­ters (72 per cent) of those who have a pen­sion either do not believe or do not know whether their pen­sion invest­ments are in line with their val­ues.

Funds will have to look for new solu­tions that are con­sis­tent with what peo­ple want

The UK has been one of the worst affect­ed coun­tries by COVID-19 and this presents a chal­lenge and an oppor­tu­ni­ty for its exten­sive, diverse and inno­v­a­tive finan­cial ser­vices sec­tor, Car­ney argues.

“Con­sumers have been shak­en, not just with health con­cerns, but also con­cerns about employ­ment,” he says. “All this means com­pa­nies are going to need to adjust their strate­gies dur­ing a time when the over­ar­ch­ing goal is to achieve net zero and peo­ple have been stand­ing back and say­ing, ‘What do we want?’ How­ev­er, bring these things togeth­er and there’s a huge com­mer­cial oppor­tu­ni­ty.”

UK uniquely positioned to become a green finance leader

Next year’s COP26 in Glas­gow will fur­ther this agen­da with the UK finan­cial sec­tor and the country’s investors and savers firm­ly in the spot­light. “One of the things we’re doing in prepa­ra­tion for COP26 is to work with the indus­try to fig­ure out ways they can com­mu­ni­cate,” Car­ney explains.

“It’s not just answer­ing ques­tions about spe­cif­ic com­pa­nies, but look­ing at whether the total­i­ty of the invest­ment, my whole pen­sion fund, is being invest­ed in a way that’s going to solve the prob­lem and move the econ­o­my towards net zero.”

Sim­ple box-tick­ing won’t wash any more, accord­ing to Car­ney, who has also argued that banks should link exec­u­tive pay to cli­mate risk man­age­ment. “We don’t just need brown/green; we need 50 shades of green and we need a way to com­mu­ni­cate more pre­cise­ly.”

He describes Make My Mon­ey Mat­ter as exact­ly the cat­a­lyst the finan­cial sec­tor needs to help open the door all the way.

“Demands from pen­sion funds and retail investors for more detailed and robust infor­ma­tion about the impact of their sav­ings on cli­mate change will force com­pa­nies in all sec­tors to demon­strate how they’re tran­si­tion­ing to net zero,” Car­ney con­cludes. “As peo­ple move their mon­ey or express their pref­er­ences, funds will have to look for new solu­tions that are con­sis­tent with what peo­ple want. That’s what cre­ates the inno­va­tion and that’s what cre­ates the jobs and growth of the future.”

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