New research from Greenpeace and WWF, shows that, despite its slick public image, finance is a hugely polluting industry, just like aviation, oil, coal and intensive agriculture.
The UK’s banks and big institutional investors are fuelling the climate crisis by backing polluting companies with loans, essential financial services and investments. This all supports things like coal mines, oil pipelines and fossil-fuel powered stations that wouldn’t have been possible without financial backing.
There’s an opportunity for them to benefit from speeding up the global green transition. But instead they’re one of the worst offenders, propping up the dirty industries that will need to shrink and ultimately disappear if we’re to avoid the worst impacts of climate change and meet the objectives of the Paris Agreement.
UK finance firms create more emissions than most countries
The report took a cautious approach to counting these ‘financed emissions’. But even then, the numbers are astonishing. By enabling polluting projects all over the world, the UK’s finance industry creates 1.8 times more emissions than the whole of the UK. In 2019, the industry was responsible for 805 million tonnes of CO2 emissions. To put that into perspective, that’s bigger than most countries. If the UK’s finance sector were a country, it would rank ninth in the world for emissions, ahead of Germany and even Canada, which has a huge oil and gas industry.
Time to get the finance industry under control
In the coming weeks and months, the UK will be hosting the G7 world leaders summit and the COP26 climate talks, and has a responsibility to show the world what true leadership looks like on climate. This gives us a huge opportunity to change finance for the better, with rules requiring our banks and investors to align with the goals of the Paris Agreement and to deliver a safe and just response to climate change.
Without proper legal regulation set by the government, this is only going to carry on.
At the moment, the law does not require firms to reduce emissions from their loans or investments, and they’re setting vague targets that don’t have the detail needed to allow outsiders to hold them to their promises. To bring the industry in line with the Paris Agreement goals to tackle climate change, it’s going to take legislation. Only then will they be forced to move with the speed and scope required to keep global temperature increases below 1.5ºC. Putting profit before people and the planet is not an option – it’s time to rein in finance.
So all eyes are on the government and the chancellor Rishi Sunak in particular. He clearly agrees with the principle of sorting out the finance sector’s climate impact, but seems to be content to tinker around the edges. For example, by simply requiring institutions to report on the climate risks associated with their activities – without requiring them to actually do anything about it!
This essentially amounts to greenwashing from the chancellor. If he wants to do something meaningful, he should change the rules to force banks and asset managers to move loans and investments away from high-carbon industries.
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