Mark Carney, co-chair of net-zero finance umbrella group GFANZ, today called for an enhancement of “the country platform approach” to scale private capital flows to emerging and developing economies.

Speaking during a panel during COP26’s first ever “finance day”, he said marrying private capital with the resources of the official sector would require coordination among multilateral development banks but that blended finance facilities were needed that mobilised not “fractions of private capital for the public dollar but multiples and multiples in double digits”.

He said there were public facilities being developed that could achieve this but that they needed to be dramatically scaled up.

Carney, who is also the COP26 private finance adviser to the UK prime minister, also said private financiers needed validation of projects in emerging and developing countries.

“Because what you’re hearing today is the money is here but that money needs net zero-aligned projects, and there’s a way to turn this into a very powerful virtuous circle, and that’s the challenge.”

GFANZ – the Glasgow Financial Alliance for Net Zero – has counted that financial sector commitments to net zero emissions now exceed $130trn (€112trn), although this is based on the various alliances’ members’ total financial assets and in the case of the Net Zero Asset Managers initiative for now the average proportion of assets that has been declared as being managed in line with net-zero is 35%.

In a speech to COP26 delegates today, UK chancellor Rishi Sunak said 80% of the global economy had committed to net zero or carbon neutrality targets.

For UN secretary general Antonio Guterres, however, there is “a deficit of credibility and a surplus of confusion over emissions reductions and net zero targets, with different meanings and different metrics”.

On Monday he announced he would establish an expert group to propose clear standards to measure and analyse net-zero commitment from non-state actors.

UK as a ‘net zero aligned financial centre’

In his speech, Sunak said the UK government would be setting up an independent taskforce to develop a “gold standard” for private sector transition plans, reporting by the end of 2022.

The taskforce is linked to plans to make it mandatory for “firms” to publish clear transition plans, a move that was trailed in the government’s “Greening Finance Roadmap” from a few weeks ago.

The government has said that initially, asset managers, regulated asset owners and listed companies would be required to publish transition plans that consider the UK’s net zero commitment, or provide an explanation if they have not done so.

“As standards for transition plans emerge, the government and regulators will take steps to incorporate these into the UK’s Sustainability Disclosure Requirements and strengthen requirements to encourage consistency in published plans and increased adoption by 2023,” it said, adding that it intended to deliver this through legislation.

The Financial Conduct Authority today published a discussion paper on new sustainability disclosure requirements for asset managers and FCA-regulated asset owners, as well as a new classification and labelling system for sustainable investment products. The regulator intends to consult on rule proposals in the second quarter of next year.

Simon Jones, head of responsible investment at Hymans Robertson, said the UK government was seeking to make planning for the transition to net zero and the disclosure of those plans “a condition of business”.

“Although not initially set to be a mandatory requirement, better and more comprehensive disclosure will allow investors to effectively scrutinise and challenge the plans that organisations have in place,” he said.

“But we need to remember that the challenge is not just one for investors, but for all parts of the economy. Having transition plans will only be effective if there are also clear and strong policy pathways, backed by regulation where necessary that require companies to change. This is what will ultimately drive a reduction in emissions across the real economy.”

In other COP26-related news:

  • Allianz and the International Finance Corporation are partnering to create a global platform that will provide up to $3bn in “climate smart” loans to private enterprises in developing economies. The development finance team of Allianz Global Investors will manage the vehicle on behalf of investors while IFC will originate and administer the loans on behalf of the vehicle in addition to providing a first loss protection.
  • Amundi and the IFC announced that they will establish a new fund to mobilize up to $2bn in private investment into emerging market sustainable bonds that support COVID-19 relief efforts and promote a green, resilient, and inclusive recovery from the pandemic. The ”Build-Back-Better Emerging Markets Sustainable Transaction” (BEST) strategy will have an anticipated life of 10 years.
  • Llifesight, Willis Towers Watson’s defined contribution master trust, is investing nearly $1bn in the consultancy’s climate transition index fund, which received regulatory approval at the end of October. The underlying index considers how moving to a low carbon economy aligned with delivery of the Paris Agreement goals, will affect projected company cash flows.

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