Government submissions

E3G Response to EAC Call for Evidence on the Financial Sector and the UK’s Net Zero Transition

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Photo of 30 St Mary Axe in London, by Andrea De Santis on Unsplash
Photo of 30 St Mary Axe in London. Photo by Andrea De Santis on Unsplash.

Delivering a successful net zero financial centre hinges upon the pace and scale at which financial institutions shift their investment portfolios to net zero.

The UK Government must ensure that the guidance provided to financial institutions to reach net zero by 2050 is robust, tackles greenwash and closes the accountability gaps in private sector guidance. This must be underpinned with strategic public investment and a clear direction of travel for policy – in other words, with a Net Zero Investment Plan.  

In July, the Environmental Audit Committee (EAC) launched a call for evidence seeking to explore the impact that net zero guidance being developed by private sector-led voluntary initiatives such as the Glasgow Financial Alliance on Net Zero (GFANZ) and Race to Zero will have on meeting the UK’s Net Zero investment.

E3G’s response to the Committee’s call for evidence recommended the following priority actions:

1. Tackle accountability gaps in the private sector net zero commitments

The UK must address accountability gaps within voluntary initiatives such as GFANZ to mobilise finance at the scale and space required to reach net zero. GFANZ guidance should not only include requiring the publication and implementation of net zero transition plans, but also strengthen the accountability mechanisms and governance structures for members with weak compliance. GFANZ should also develop clear requirements to phase out fossil fuel and coal investments.

2. Establish a clear plan for financing the transition in the 2022 Green Finance Strategy

The revised Green Finance Strategy should deliver a plan that integrates all the tools in the government’s toolkit to support a credible transition to net-zero. This strategy must establish the public policy coherence required to leverage private finance for meeting the UK’s net-zero and adaptation targets. 

3. Support a managed phase-out of fossil fuel investment in the UK

The current UK public policy paradigm hinders rather than accelerates the transition towards clean investment required to deliver the UK’s net-zero goals. Policy coherence should be established under the Green Finance Strategy to address this problem and minimise the risk of the cost of decommissioning stranded assets falling substantially upon the state.

                                

Read E3G’s full response to the EAC here.

Read E3G’s Key Elements for the Green Finance Strategy here.

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