COP26: Mark Carney hails landmark finance alliance, but green groups warn of loopholes

Prime Minister Boris Johnson’s COP26 finance advisor has hailed a landmark finance agreement that will see leading firms sign up to provide £95 billion towards hitting net zero emission targets by 2050.

Mark Carney, the UN’s special envoy on climate action and finance, said the Glasgow Financial Alliance for Net Zero (GFANZ) deal demonstrated how the financial sector was “no longer a mirror that reflects a world that’s not doing enough”.

However, environmental groups warned there were too many loopholes in the ambitious plan and no legal obligation on the part of financial institutions to steer clear from investing in carbon-heavy activities.

It emerged last month that some of the banks signed up to GFANZ had stopped short of committing to the most ambitious road map for cutting greenhouse gas emissions.

Addressing the finance day inside the COP26 blue zone in Glasgow’s SEC campus on Wednesday, Mr Carney said the GFANZ alliance – made up of banks, pension funds, insurers, stock exchanges and other firms – was “committed to transforming the economy for net zero”.

“A few years ago, the financial system held a mirror to the climate crisis,” he explained.

“Despite the breakthroughs in Paris, few countries had net zero commitments, very few had adequate policies for their commitments.

“Business investment in decarbonisation was limited, business net zero plans were by exception, and most in the financial sector consider climate change a CSR [corporate social responsibility] issue, not a strategic imperative.

Mark Carney, the UN special envoy for climate action and finance, addresses COP26. Picture: Daniel Leal-Olivas/AFP/Getty

“Too many thought this was someone else’s problem and, as a consequence, when some of our leading financial institutions around the world calculated the implied temperature warming of the companies in their portfolios, they found that the world was on course for more than 3C warming.”

By contrast, Mr Carney said, GFANZ would fundamentally rearrange the "plumbing of finance" to help tackle the climate crisis.

The former governor of the Bank of England, who is now the vice-chair of Brookfield Asset Management, said the aim was to build a financial system “in which every decision takes climate change into account”, with a range of measures being introduced, including widespread climate stress testing and robust net zero assessments of portfolios.

“These seemingly arcane, but essential changes to the plumbing of finance can move, and are moving climate change from the fringes to the forefront, and transforming the financial system in the process,” he stressed.

“Finance is no longer a mirror that reflects a world that’s not doing enough. It’s becoming a window through which ambitious climate action can deliver the sustainable future that people all over the world are demanding.”

However, the Environmental Justice Foundation said that providing the vast sum of money was not enough in isolation.

Steve Trent, the charity’s CEO, said: “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.”

The Bank on Our Future campaign group described the plans as “a mile wide and an inch deep”, warning those asset managers who had signed up to GFANZ had only aligned around 35 per cent of their total assets to net zero targets.

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