A big week for the ‘green revolution’

This week represents another, very significant, step in the journey towards a greener future.

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  1. Rob Morgan

It’s been one of the defining weeks of 2020. News of a potentially successful Covid-19 vaccine has ignited stock markets already buoyant from the (very likely) election of Joe Biden as US President. In many ways, it feels like the start of a new era.

A new chapter also begins in the multi-year trend we refer to as the ‘green revolution’. The Democratic administration has a different agenda and uppermost in its priorities is ‘Building Back Better’, greatly strengthening commitments to renewables, battery technology and green targets. Biden will re-join the Paris accords on climate change and commit the US to a net-zero carbon future. Other Trump rollbacks on green policy, such as relaxing emission standards and deregulating the oil and gas sector, could also be rapidly reversed as they were enacted via executive order.

It remains to be seen to what extent Biden can push through his ambitions to incentivise the widespread adoption of renewable energy and modernisation of the grid, though. A lack of Democrat majority in the Senate might limit the extent of his green infrastructure spend. As my colleague, Garry White, points out the tight outcome of the American election has impacted the rate of change. Nonetheless, more robust climate action is likely under the President-elect, which will add to the torrent of national and corporate pledges announced in recent months and the growing consensus in support of ‘net zero’.

Against the backdrop of the unfolding US election result, the Green Horizon summit, an online warm-up to the pandemic-postponed 26th UN Climate Change Conference (COP 26) in Glasgow next year, took place this week, gathering politicians, financiers, central bank policymakers and industry executives. The event focused on some concrete actions and commitments ahead of the Glasgow event and provided some interesting insights into the direction of travel for green finance.

Mark Carney, the former Bank of England Governor, and now the United Nations special envoy for climate action and finance and the UK prime minister’s finance adviser for COP26, laid out a roadmap for the net-zero transition, calling on banks, insurers and fund managers to play their part in “re-engineering” the global economy toward eliminating greenhouse gas emissions. Carney said investors should disclose how closely portfolios are aligned with the net-zero transition but pointed out that existing climate-related metrics such as carbon footprints and CO2 emissions per dollar invested are backwards rather than forward-looking so not best suited to measuring a broad economic transition. A pilot market for international carbon trading was also outlined by The Taskforce on Scaling Voluntary Carbon Markets.

Meanwhile, Chancellor of the Exchequer Rishi Sunak MP announced the intention to issue UK sovereign green bonds next year. These ‘green gilts’ are designed to meet growing investor demand for green bonds and help fund projects to help tackle climate change, finance low-carbon energy infrastructure and create green jobs. European countries, including France, Germany and the Netherlands, have already issued green debt.

In addition, Mr Sunak said the government will seek to implement a green ‘taxonomy’ to provide a common framework for determining which activities can be defined as environmentally sustainable, building on the EU's development of such classifications. The Chancellor also confirmed that the public disclosure of risks posed by climate change and the net-zero transition will become mandatory for major companies from 2025. Altogether, its been a big week for the transition to renewable energy and a greener future.

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