UK sets out plans to become first carbon neutral financial hub

As part of the UK’s wide reaching net zero pledge, Rishi Sunak has announced that the UK will become the world’s first carbon neutral financial hub.

The news was announced by the chancellor at the Cop26 world summit in Glasgow, where world leaders and businesses are meeting to discuss how to create a more sustainable future.

As part of the initiative, leading financial firms in the UK must have laid out plans to become carbon neutral by 2023. Each firm's roadmap will be scrutinised by a group of experts to prevent green-washing, a term used to describe a company that makes eco-friendly pledges to meet requirements or win over consumers without offering any real substance.

“Today I am announcing the UK will go further and become the first ever net zero aligned financial centre,” said Sunak.

“This means we are going to move towards making it mandatory for firms to publish a clear, deliverable plan setting out how they will decarbonise and transition to net zero with an independent task force.”

The new regulations will apply to some of the largest financial institutions in the world, who combined manage around 40% of global assets.

Around £100 million will be allocated to the body in charge of ensuring that these changes are met. Named the Transition Plan Taskforce, it will work alongside firms to draw up plans and make sure that targets are met.

Despite the strong tone set out by Sunak, the new initiative will not be a legal requirement, causing some concern among critics who said that the latest pledge while sounding punchy did not go nearly far enough.

Charlie Kronick, senior climate adviser at Greenpeace UK, said: “This Cop demands transformative action in the financial sector but the chancellor has arrived with a marketing slogan.

“The world’s first net zero aligned financial centre would be one in which financial institutions and companies are required by law at the outset to bring their lending and investments in line with the global goal to limit warming to 1.5C. Instead, these new rules seem to allow plenty of wiggle room for financial institutions to continue with business as usual, rather than ‘rewiring’ the system as the chancellor claims.”

There were similar concerns Mark Campanale, founder of environmental think tank the Carbon Tracker Initiative, who noted the importance of making such changes enshrined in law.

“The true cost of reducing emissions for companies would wipe billions off their fixed assets of the fossil fuel system we’ve built up over 200 years of industrialisation,” said Campanale. “The pipelines, the oil rigs, the coal-fired power stations, the LNG ships will be written off ... so destroying value for shareholders.

“Disclosure of asset write-downs cannot be voluntary. Companies and their auditors must be honest about the concrete financial risks.”

The news was welcomed however by several of the UK’s leading firms, with vice-chairman of financial services at KPMG Kay Swinburne saying that the task force would create a “valuable set of unified metrics to measure progress towards decarbonisation".