Chris Bambery

Chris Bambery

COP26: Will the City Save the World?

Reading Time: 5 minutes

In his column from the London political scene, Chris Bambery argues that finance capital is too unstable and rapacious to be a driving force behind a meaningful energy shift.

A portion of the moneyed and powerful neighbourhoods of world cities migrated to Glasgow last week, and London was no exception. Chancellor of the Exchequer Rishi Sunak flew into Glasgow on a day trip to outline his vision of the UK’s mission to “rewire the global financial system for net-zero.” He led the finance day of COP26, outlining plans on sovereign ‘green bonds’ and corporate climate disclosures.

Sunak had faced much criticism following his Budget speech the previous week, which included cuts to domestic air passenger duty and provided just £9 million of extra funding for nature preservation. Now, he could present London as the unlikely saviour of our climate woes because of, rather than in spite of, its status as a global financial hub. This line of argument dovetailed with statements from Boris Johnson and Joe Biden, asserting that markets and capitalism were the surest remedy to environmental destruction.

Specifically, Sunak was there to provide an update on the Glasgow Financial Alliance for Net-Zero (GFANZ), which launched in April. Its putative aim is to unite the global finance sector to transition to net-zero portfolios by 2050. Members are required to transition their portfolios in line with the Paris Agreement and are being pushed to work towards 1.5C rather than 2C temperature rise pathways.

On paper this looks a significant initiative. Members of GFANZ hold more than $130trn of assets under management, around 40% of the world’s total financial assets, up from $90trn at the start of October. These assets are held by 450 firms across 45 nations, from all parts of the financial industry.

Yet it is not clear whether the measures announced by Sunak in his Budget and in Glasgow, together with other announcements due to be delivered before the year’s end, will deliver GFANZ’s recommendations that high-carbon financing will cease to remain profitable. One recommendation which has already fallen through is for the G20 member nations to commit to ending fossil fuel subsidies; the G20 meeting of world leaders held in Rome prior to COP26, produced only weak agreements on this.

Reclaim Finance point out the bulk of assets managed by the alliance are yet to be managed in a way that will deliver net-zero by 2050. Moreover, the Alliance is using its own temperature pathway. The United Nations has promised that it will develop its own standard for checking non-state actors’ commitments, but this is not yet finalised.

A key recommendation of GFANZ is that there should be a mandate for all corporations and public enterprises to develop net-zero transition plans by the end of 2024, accompanied by governments introducing a legal net-zero target. Late last month Sunak unveiled the UK’s Roadmap to Sustainable Investing, which contains a requirements for sustainability-related disclosures, designed to tackle ‘greenwashing’ in the financial sector and encourage corporates to front-load their transitions to net-zero. Currently, financial houses and their various subsidiaries and partners make a great show of their environmentalism, which is typically without much substance.

Under the new Roadmap one of the key measures is a new mandate for all firms offering financial products to publicly disclose the environmental impact of all activities they finance. They will also need to justify any sustainability claims made about their products and disclose how they fit into broader investment strategies. A recent poll of investors holding more than US$25.9 trillion in assets, found greenwashing to be the biggest challenge to investing sustainably.

Plans for new measure to tighten the requirements on investors are not known at this stage and it is a matter of contention whether GFANZ will deliver on its promises.

A crucial issue, not yet resolved, is whether the wealthiest nations who make up the Organisation for Economic Co-operation and Development (OECD), deliver climate finance to the Global South – a promised $100bn in climate finance annually. This target has not been met for any year so far.

Sunak promised that the full $100bn will be paid in 2023, as laid out in the roadmap drawn up by the UK, Canada and Germany. He stressed how vital it was that the private sector should commit trillions to these billions and announced a new Climate Investment Funds Capital Markets Mechanism to connect capital provision and demand.

The UK, under Sunak’s plans, has promised that all returns from the UK’s contributions to Climate Investment Funds (CIFs) will be used for the issuance of further green bonds. The Government issued the first of these this year – two packages of £10bn and £6bn respectively. The Chancellor has promised that the UK will become the world’s first net-zero financial centre, with all portfolios aligned with the net-zero transition by 2050 at the latest.

A plan for a sustainable economy would require reductions of private transport with massive investment in cheap, environmentally friendly and far-ranging public transport. For instance, when the Channel Tunnel was built the plan was for trains to run from Scotland and the North of England to Paris and Brussels. That promise should be fulfilled now.

We live in a world where huge levels of military spending are both wasteful and highly damaging to the environment. Military emissions are excluded from the present calculations. Britain’s latest super aircraft carrier is currently deployed in the South China Sea in a US led operation aimed at containing China.

What are its emissions? Naturally, we aren’t told and perhaps if we pressed we’d find that this was a national security secret. This shouldn’t dissuade us from following the example of the US socialist journalist Abby Martin, who at COP26 challenged Nancy Pelosi – speaker of the US House of Representatives – on the carbon cost of her government’s expansion of the US military state.

These were points well made by climate protestors during the week’s mobilisations. Extinction Rebellion (XR) held a Peace March on Thursday (4 Novemebr) to highlight the impact of war on climate change. The previous day, hundreds of XR activists took to the streets to expose world leaders’ greenwashing. Outside JP Morgan, they held up a banner reading: “JP Morgan – World’s Dirtiest Bank.”

What they were pointing out is that despite the pledges made about green investment by Sunak and others, the logic of capitalism leads in a different, more dangerous direction.

Last week figures revealed the vast profits corporations extracting coal are making. Shares of Thungela Resources have soared by 300% since it set up independently of the mining giant Anglo American in July. The company is today worth more than £400 million.

Glencore – the world’s biggest extractor of coal – are set to make bumper profits for shareholders this year. Analysts at the JP Morgan bank say Glencore, say the corporation is set to make a record £6.08 billion in 2022, increasing its extraction of coal to 120 million tonnes. The price of coal has risen because of the current gas crisis and increasing energy demand as the pandemic restrictions ease.

At COP25 many countries pledged to move away from using coal, but the USA, China, Australia, India, refused to sign up. China has increased coal production as prices increased, while the USA’s Energy Information Administration reports that the USA will use an estimated 22% more coal in 2021 compared to 2020.

This demonstrates the great problem with market solutions to climate change. State and trans-national planning and co-ordination does happen, but it is frustrated, diluted, even destroyed by forces of inter-state competition and corporate profiteering. The pace of change is set by the expediencies of big states and big capital.

If it fits the competitive advantages of states like the US and China to revert to coal for a period, they will do it. Pledges to the environmental energy lobby can be fulfilled some other day, or simply become someone else’s problem.

And of all the forms of capital, finance might prove among the most antithetical to sound, long term planning and change. Finance is prone to wild speculation, fits of irrationality and sudden collapse, and enjoys major influence in the corridors of power. How can we invest this force with our hopes for a just and timely transition?

Naturally, Sunak sees the UK’s great world export as the guarantor of civilisation, and the boys in the bubble of The City are likely to agree. We can’t afford to.

Would you like to read more?
Support our work
Donate now