COP 26 and Finance

Below is our analysis of COP 26 and how it relates to financial planning, written by Sarah Farrar

Certainly, even if you’re cynical about the real actions that’ll come out of it, there’s no denying that Glasgow’s COP26 has put the fight against climate change front and centre in recent days.    

One organisation who’s used it to further their historic battle on these lines is the WWF.  (We’re currently very much on their mailing list having celebrated our 14th wedding anniversary this year – Ivory – and therefore adopted an elephant through them!!).   

WWF communications tend to be brilliant, but none more so than those associated with COP26.  One aspect that grabbed my attention with my work hat on was their COP Update email, which included the ‘Promise Breakthrough: Make Our Money Greener’.  Big business has promised they will redirect money away from polluters.  And organisations like WWF, will track promises made at COP, via their impactful ‘Climate Promise Trackers’.   

This promise is indeed a big breakthrough for sustainable finance.  And Rishi Sunak announced new rules that’ll make it compulsory for big UK firms to show how they’ll hit their climate targets. 

WWF’s analysis shows that the government is making some progress and financial institutions are making voluntary pledges to net zero, but neither is moving fast or deep enough for the climate emergency.  Their 2021 joint report with Greenpeace  showed that the carbon emissions financed by a subsection of UK banks and investors are still responsible for nearly double the UK’s annual carbon output. In fact, if such banks and investors were a country, they’d rank as the 9th biggest emitter of CO2 in the world.  

Boris Johnson has pledged that his government will work with the private sector to deliver a world-leading net zero financial system.  But the finance sector can only really become net zero if the companies being financed are net zero as well. The whole economy will have to transform. And there simply aren’t enough companies "on target" for net zero.  Currently there’s still far too much money being poured into climate-damaging industries like fossil fuels, plus deforestation and other activities that are destroying nature – our biggest ally in the fight against climate change.  
 
The UK government has acknowledged that bringing businesses along is vital for reaching the UK’s climate change goals. Its  Ten Point Plan for a Green Industrial Revolution, 2020, stated, “Our vision is for the UK to be a global leader in the technologies needed to decarbonise our economies and transition to net zero”. 
 
WWF’s analysis has shown that although nearly three-quarters of FTSE 100 companies have publicly stated their net zero commitments, shockingly few - only  20%, have published clear action plans as to how they’ll actually deliver that net zero target. And only  28%  of FTSE 100 companies have set full science-based targets through the Science Based Targets initiative (SBTi) – the body that helps businesses calculate a clear path to lower emissions.  
 
The UK’s Climate Change Committee calculates that net zero investment needs to increase five-fold this decade - from approximately £10B per year in 2020, to around £50B in 2030. WWF argue that this kind of change will only be reached when backed by ambitious government policies.  
 
The UK government has confirmed it will legislate for certain companies to introduce net-zero transition plans. The WWF argues it now needs to act on this and make net zero plans compulsory for all large companies, including financial institutions, by 2023. It’s essential that government provides guidance for net zero transition plans and that the plans align with 1.5°C warming. Currently there are unclear timeframes and details of these changes.  As ever, the devil is in the detail.  

Keep track of where the five promises are via the WWF’s Climate Promises page.  Those being: 

  1. The 1.5°C warming limit will be kept within reach 

  2. The UK will be 'net zero' carbon by 2050 

  3. Vital forests like the Amazon will be protected 

  4. Money will be redirected away from climate polluters 

  5. Nature will be at the heart of climate action 

You can share the promise on social media, so in this case – ‘Money will be redirected away from climate polluters’, because, as the WWF put it, the more people who know about it, the harder it will be to break.   

And you can remind our leaders, where you can send them a sign to show that people are watching.  Your sign could be anything - a placard, poster, post-it, whatever works for you.  Share your sign with WWF by uploading a pic of it to social media, tagging @wwf_uk and using the hashtag #WeWontForget.  You can also ask your MP to take action - the most impactful way of reminding the UK  Government about their promises.   

At Parsonage we’re proud to offer a range of responsible investment portfolios and would be delighted to support you in pursing this approach.  Socially Responsible Investing offers clients the option to invest to make positive, measurable social and environmental impacts, alongside financial return.  All the while avoiding ‘sin stocks’, like gambling, alcohol, smoking or weapons, and also promoting change within an organisation.  If this is all something you would like to do with your money, then get in touch and have a chat - 0161 928 2706, info@parsonagefinancial.co.uk.   

Duncan Farrar