Welcome net zero transition plans must be underpinned by international carbon pricing and markets

In the Chancellor of the Exchequer’s speech to COP26 today, he announced plans to make London the world’s first net zero-aligned financial centre by mandating the publication of transition plans to reach net zero for financial institutions and listed companies.

Reacting to the announcement, Josie Murdoch, Senior Policy Officer at the Aldersgate Group, said: “This marks a huge step forward on aligning financial flows with the ambition of the Paris Agreement and limiting warming to 1.5 degrees. The announcement builds on the existing requirements in the UK for companies to publish their climate-related financial disclosures, which outline the risk climate change poses to their business operations, and follows a major call for mandating net zero transition plans from many Aldersgate Group members and FTSE 100 companies, including BT, Kingfisher and Tesco, and financial institutions such as Aviva, Legal & General Investment Management and Santander. It will now be vital for the Government to work closely with the business and finance communities to give them the support, guidance and time needed to implement these new requirements.

The Chancellor’s announcement also follows the news last night that the Glasgow Financial Alliance for Net Zero – an alliance made up of more than 450 banks, insurers and asset managers across 45 countries – is poised to deliver $100 trillion of investment over the next thirty years. Domestically, it is estimated £50 billion of additional investment will be required by 2030, in the UK alone, to put us on track to deliver net zero by 2050. Internationally, estimates have been put at US$100-150 trillion. These new announcements put delivery of these investment requirements within reach. It is critical that the UK now uses the remainder of the summit to encourage more countries to adopt mandatory climate-related financial disclosures – to date, 35 countries have committed to this – and introduce regulation on net zero transition plans.”

Josie Murdoch added: “These pledges must not be seen as the silver bullet to delivering a net zero-aligned global financial system. We now need supporting policies, such as a strengthened carbon price to reflect the real economic cost of emitting carbon into the atmosphere, and world leaders must agree the rulebook for Article 6 of the Paris Agreement and establish a credible global carbon market. These measures will further ensure financing is flowing into the low carbon technologies and infrastructure needed to meet net zero by 2050.”