February 27, 2020 / 9:36 AM / a month ago

BoE's Carney urges City of London to step up ahead of climate summit

LONDON (Reuters) - Bank of England Governor Mark Carney called on London’s money managers on Thursday to help speed a transition to a low-carbon future, aiming to usher in a new era where every professional financial decision takes climate change into account.

FILE PHOTO: David Attenborough attends a conference about the UK-hosted COP26 UN Climate Summit, at the Science Museum in London, Britain February 4, 2020. Chris J Ratcliffe/Pool via REUTERS/File Photo

Carney wants to leverage a U.N. climate summit in November to strengthen a raft of initiatives to spur a major reallocation of capital away from polluting industries in time to prevent global warming toppling industrial society.

“Private finance will have a critical role to play in a successful transition to a net zero (carbon emissions) economy,” Carney told an event at London’s Guildhall, also attended by European Central Bank President Christine Lagarde.

“We should make no mistake about it: Achieving net zero requires a whole economy transition. Every company, every bank, every insurer, every investor will have to adjust business models. But doing so will turn an existential risk...into the greatest commercial opportunity of our time,” Carney said.

Carney is due to take over as U.N. special envoy on climate finance next month after stepping down as governor. He has also been appointed to advise British Prime Minister Boris Johnson in the run-up to the Nov. 9-20 climate summit in Glasgow.

The Guildhall event was billed as the launch of a “Private Finance Agenda” component of the summit, consisting of existing initiatives Carney has championed since he began working to push climate change to the forefront of investors’ minds in 2015.

These include moves to encourage companies to be more transparent about the risks they face in a rapidly warming world, stress tests to reveal how banks would fare as temperatures rise, and ways to allow investors to gauge the impact of their portfolios on the climate.

Carney hopes such measures will help the financial industry drive transformational change in energy, agriculture, heating, transport, fashion and other sectors needed to help Britain achieve its goal of net zero carbon emissions by 2050.

Lagarde, who began an overarching review of the ECB’s policyframework last month, echoed Carney’s calls for banks to be more open about their exposure to climate-related risk, saying disclosures on the issue have “some way to go.”

“The (ECB) is now reviewing the extent to whichclimate-related risks are understood and priced by the marketand is paying close attention to how credit-rating agenciesincorporate such risks into their assessments ofcreditworthiness,” Lagarde said.

“Preparatory work is also under way for a macroprudentialstress test to assess climate-related risks, with the firstresults expected by the end of the year.”

With the Earth on track for temperature increases that some scientists and economists believe could endanger the survival of modern societies, the Glasgow summit is seen as a critical test of the 2015 Paris Agreement to combat climate change.

Newly appointed Business Minister Alok Sharma, who Johnson named as president of the summit this month after sacking a former energy minister from the role, backed Carney’s call for the City, London’s financial centre, to step up.

“In Glasgow, the world must ramp up momentum towards a zero carbon economy,” Sharma told the Guildhall event. “All countries must commit to significant further cuts to carbon emissions by 2030 and to reach net zero as soon as possible.”

Additional reporting by Balazs Koranyi in Frankfurt; Editing by Mark Heinrich

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