So far, the big message from the Glasgow climate conference is the role of finance in decarbonising the global economy. It’s a dangerous development. In his speech to COP26 last week, the Chancellor, Rishi Sunak, pledged action to ‘rewire the entire financial system for Net Zero.’ Finance has taken centre stage in large part because of inadequate government policies. According to the United Nations Environment Programme, around two-thirds of global emissions are linked to private household activity. Reducing them requires major changes in people’s lifestyles, UNEP says.
Rather than imposing carbon taxes that really hurt – the Intergovernmental Panel on Climate Change estimates a minimum of $135 a ton, rising up to $14,300 a ton in order to hit net zero in 2050 – governments prefer to outsource the heavy lifting to the world of finance in the hope that it will provide a pain-free path to the net zero goal. Up until now, central banks and financial regulators – particularly the Fed and the SEC in the US – have been maintaining the pretence that their involvement in climate policy is motivated by concern about climate financial risk. As I show in my new report for the RealClearFoundation, ‘Climate-Risk Disclosure: A Flimsy Pretext for a Green Power Grab,’ climate financial risk is a smoke screen for a green power grab. Now, Sunak has done the world a favour and exposed it for what it is.
Sunak might well have been speaking from a script provided him by Mark Carney, former Governor of the Bank of England and instrumental in bringing together the Glasgow Financial Alliance. ‘We must build a financial system entirely focused on net zero,’ Carney says. Though billionaires and multimillionaires they may be, oligarchs of finance are custodians of other people’s money. What’s missing in the craze for net zero and ESG (environmental, social and government) investing is B – as in B for beneficiaries.