Few could ignore the protests that surrounded UK’s finance day on November 2nd, which threatened to overshadow COP26. Green activist groups were protesting against ‘greenwashing,’ frustrated that the public has been misled about the success of green initiatives.
Rishi Sunak made a speech in which he promised multi-trillion-dollar commitments. He said all the right things and even suggested that he would put the required pressure on the private sector. Surprisingly, he even said that the government would financially contribute more readily to green initiatives in developing countries. He then went on to avail that the United Kingdom would become the first Net Zero Aligned Financial Centre. What does this mean? In a nutshell, all financial institutions in Britain will soon be required to achieve net-zero emissions. Ambitious? Yes. Achievable? Perhaps.
His speech wasn’t warmly received by everyone, with a Net Zero Asset Managers report essentially suggesting that the gestures made by Sunak weren’t as they seemed. Specifically, the report highlighted that a bit of digging is enough to show that the numbers are misleading. As the UK continues its recovery from the pandemic, it’s not evident where the money will come from to fund climate change initiatives.
A commitment to net-zero
Bringing our carbon emissions to net-zero won’t be cheap. However, it’s definitely cheaper than dealing with issues arising from climate change. For context:
- The UK has suffered to the tune of £300 billion due to the pandemic.
- Estimates indicate that the cost of getting the UK to net-zero would cost £1 trillion over 20 years.
- If the government doesn’t take any action, the cost is likely to be nearer £2 trillion to deal with climate change.
Officials at COP26 made it clear that preventative measures must be taken as soon as possible. But what does the UK government think? Rishi Sunak highlighted the following:
- 80% of the planet’s economy is committed to carbon neutrality or net-zero.
- The UK has promised $100 billion to support developing countries with reaching net-zero.
- An additional £100 million has been pledged to the Taskforce on Access to Climate Finance.
- Mandatory sustainability disclosures will be created to hold the private sector to account.
What the chancellor omitted from his speech
Despite his grandiose pledges, Rishi Sunak omitted one essential aspect from his speech: how on earth will the UK government achieve these targets? The financial sector is hardly squeaky clean when it comes to pledges and ignoring loopholes, so there’s a lot still up in the air about how things will play out. Given that so many governments are failing on targets laid out by the Paris Agreement – due primarily to Covid-19 – it begs the question, how will this be any different?
Activist investing brings hope to the table
While the government’s announcement that they will pressure the financial sector is welcome, it’s not enough. For real, lasting change, investors must pressure their companies from within and develop metrics that can be tracked and evaluated. This is where activist investing has such an important role to play. It forces companies into action and necessitates compliance with key ESG initiatives.
Activist investing platforms like Tulipshare are already doing what they can to drive change from within. This collective approach to investing is undoubtedly a step in the right direction, at least where holding the government and private sector to account is concerned.