The Capitas Green Briefing: What’s new in May for transformative green money?

This month green investments are hitting the headlines. Find out what's new in our May Capitas Green Briefing...

Growing push for Net Zero finance

This month green investments are hitting the headlines. The Guardian is reporting that pension funds must set a target of Net Zero emissions for their investments if the UK is to meet its climate goals, influential figures in climate activism have urged.

The UK pensions sector accounts for about £2.6tn in funds, so any shift towards investing in lower-carbon portfolios would have a strong effect in investment and business.

Prominent climate campaigners have written to urge pensions companies to sign up to green investment principles. Among signatories are Christiana Figueres, the former UN climate chief who oversaw the Paris agreement and Amanda Mackenzie, chief executive of the charity Business in the Community.

Tellingly, Mark Carney, the former governor of the Bank of England and a UN climate envoy, recently announced a new initiative called the Glasgow Financial Alliance for Net Zero, under which banks and financial institutions, including Barclays, HSBC and the insurer Axa, have signed up to low carbon pledges.

And, signatories including the chief executives of Aviva, Legal & General, Fidelity International and Jupiter Asset Management said Boris Johnson should pledge a Net Zero financial system before June’s G7 summit in Cornwall.

In our view, it all adds up to a massive drive for comprehensive Net Zero requirements across UK money, both investment pots and the funds that could transform low carbon business.

Treasury reports on green finance

Continuing green finance themes, The National Law Review notes that at the end of April, the House of Commons Treasury Committee published a report on Net Zero and the future of green finance in the UK. It calls for an issuing of the UK’s first green sovereign bonds (or ‘green gilts’) and a firm outlining of the principles on which the UK will fund its transition to Net Zero.

6th Carbon Budget becomes law

The UK’s sixth Carbon Budget will incorporate the country’s share of international aviation and shipping emissions for the first time, to bring the UK more than three-quarters of the way to Net Zero by 2050, says the Government.

Prime Minister Boris Johnson said: “The UK will be home to pioneering businesses, new technologies and green innovation as we make progress to Net Zero emissions.”

Even amid today’s largely pro-green atmosphere, it is rare to see this much activity on Net Zero and overall UK targets in a single month. This hints that the pace is truly quickening towards a lower carbon economy and equally sustainable supporting financial sector as the year passes.

CO2, Covid and global futures

The International Energy Agency (IEA), says the BBC, is predicting a major surge in CO2 emissions from energy this year, as the world rebounds from the pandemic.

In a remarkable year for global energy, total energy emissions for 2021 will still be slightly lower than in 2019, but CO2 will rise by the second largest annual amount on record.

The use of coal in Asia is expected to be key: the IEA says it will push global demand up by 4.5%.

“Global carbon emissions are set to jump by 1.5 billion tonnes this year – driven by the resurgence of coal use in the power sector,” said Fatih Birol, the IEA’s executive director.

“This is a dire warning that the economic recovery from the Covid crisis is currently anything but sustainable for our climate.”

Prof Corinne Le Quéré, from the University of East Anglia, told the BBC that, “Stimulus spending post-Covid-19 worldwide is still largely funding activities that lock us into high CO2 emissions for decades.”

The final word

This month’s Capitas Green Briefing makes for an opaque picture with Capitas Finance’s Chief Executive Officer Darren Riva commenting: Evidently, UK progress on Net Zero and the Carbon Budget are compellingly good reading, as is the clear trend towards greener finance. Correctly leveraged, this should hasten both energy efficiency and the efficacy of sustainable financing.

“But the IEA’s energy assessments hint that lessons which might have been hammered home by Covid remain unlearned. It’s self-evident the pandemic has caused unprecedented harm and that climate change and CO2 emissions, undiminished, will wreak similar if not worse havoc with future lives and economies. Yet for now, Covid lessons appear not to be translating into sufficiently urgent and multilateral action on energy, its sources, better efficiency and indeed how and why we burn things in the first place.”