Sunak Says U.K. Will Lead on Green Finance: Green Summit Update
BOE to Start Climate Stress Tests in June: Green Summit Update
(Bloomberg) -- The Green Horizon Summit in London began Monday, gathering politicians, financiers and central bank policy makers as well as industry executives.
Mark Carney, the former Bank of England Governor, is laying out a roadmap for the net-zero transition. He’s calling on banks, insurers and fund managers to play their part in “re-engineering” the global economy toward eliminating greenhouse gas emissions and said there’ll be great rewards from doing so.
Other speakers include U.K. Chancellor of the Exchequer Rishi Sunak, Jes Staley, group chief executive officer of Barclays Plc, and Christine Lagarde, president of the European Central Bank.
Key Developments:
- Sunak announces U.K.’s first green gilt
- Carney sets out details of green finance roadmap
- ECB’s Lagarde calls on finance industry to recognize role in green economy
- BOE Governor Andrew Bailey says the central bank will launch its climate stress tests for commercial lenders in June 2021
Here are the latest developments, updated throughout the day. (Timestamps are for local time in London on Monday.)
Sunak Says U.K. Will Lead World on Green Finance (4:25 p.m.)
Chancellor of the Exchequer Rishi Sunak gave a taster of his summit speech in a statement to the House of Commons. In his vision for financial services after Brexit, Sunak said he wants the U.K. to be a “world leader in the use of green finance,” and confirmed plans to issue a green bond in 2021.
The Chancellor also said the U.K. will mandate the Task Force on Climate-related Financial Disclosures (TCFD) across the economy by 2025, going beyond the “comply or explain” approach. He also said the U.K. will implement a green taxonomy, which is a common framework for determining which activities can be defined as environmentally sustainable.
Kwarteng: U.K. Green Industrial Strategy Later In Year (2:05 p.m.)
U.K. Energy Minister Kwasi Kwarteng said the government will unveil its green industrial 10-point plan later this year, as part of its efforts to have green recovery from the pandemic.
He also said a strategy for decarbonizing heat and reducing emissions from buildings will be announced in the next few months.
Sunak To Announce First Green Bond (1:23 p.m.)
Chancellor of the Exchequer Rishi Sunak is expected to announce plans to issue the U.K.’s first green gilts later today, according to a person familiar with the matter. The bond plan is part of the government’s efforts to burnish the U.K.’s green credentials as the country gears up to host a major set of United Nations climate change talks next year.
U.K.’s FCA to Introduce Disclosure Rule Around Climate Change (11:30 a.m.)
Britain’s market watchdog is introducing rules requiring the majority of the U.K.’s listed companies to make better disclosures about how climate changes affects their business.
The regulator intends to introduce a new rule for reporting periods beginning from Jan. 1 next year, Financial Conduct Authority Chief Executive Officer Nikhil Rathi said Monday at the Green Horizon Summit.
The rule will cover firms making up two-thirds of the market value of U.K.-listed equities, Rathi said.
“We want green and sustainable finance to be at the heart of the continued growth of London as a global financial center,” he said.
BOE’s Bailey Says Climate Stress Tests to Start June (10:52 a.m.)
The Bank of England will launch its climate stress tests for commercial lenders in June 2021, Governor Andrew Bailey told the conference. The tests, which are designed to gauge the resiliency of the largest financial firms’ business models to the physical and transition risks from climate change, had originally been planned for the second half of this year but were delayed due to the pandemic.
The exercise will consider three different scenarios over a 30-year period, Bailey said. Although the central bank will not use the results to determine the rules for capital buffers, firms should still be thinking about near-term capital requirements and investments, he said.
Biden Election Bodes Well For Climate, CEOs Say (10:44 a.m.)
Barclays Plc Chief Executive Officer Jes Staley said he expected Joe Biden’s election victory to be a “significant and positive step” for climate change policy.
That echoed comments from fellow panelist David Schwimmer, the CEO of the London Stock Exchange Group Plc, who said he expects the Biden administration to enact big changes in the U.S.’s approach to climate change.
Ninety One Says Asset Managers Have to Do More (10:05 a.m.)
John Green, chief commercial officer for asset manager Ninety One, said all asset owners, pensions, sovereign funds and insurers should ask if they’re doing enough to allocate capital to investments and strategies that support and benefit from de-carbonization. He also said investment consultants have a “critical” role to play as they “advise and guide asset owners.”
Asset managers have to do “more more and better,” he said. “We have to understand and price climate and sustainability risk in all of our investments.”
Lagarde Says Climate Risks Must Be Included In Ratings (9:49 a.m.)
European Central Bank President Christine Lagarde called on financial-market players to recognize their responsibilities in ensuring an orderly transition to a greener economy. As long as a global and adequate price on carbon emissions remains elusive, financial institutions can provide “powerful and complementary impetus for change.”
Lagarde has previously used this argument to question whether the ECB’s asset purchases should continue to mirror the composition of the bond market. She didn’t address this possibility today, although she pointed out that climate risks currently aren’t adequately priced.
Carney Sets Out Business Case For Tackling Climate Change (9.30 a.m.)
Carney laid out the business case for investing in climate-change mitigation saying it was the “greatest commercial opportunity of our time” and that changing consumer and business practices could not be ignored.
Net-zero carbon transition plans will become the norm at large firms, he said, as companies come under increasing pressure from investors, regulators and governments to respond to climate risks. A more transparent carbon offset mechanism was needed for this, Carney said, adding that a consultation on such a structure would be released Tuesday.
Investors should also have a vote on climate-related policies at public firms, in the same way they already vote on pay packages for senior executives, Carney said. Asset managers are already under pressure from their investors to ensure portfolios are climate friendly, he said.
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