UK Government gives the Financial Sector a free pass for global destruction

Avoiding global destruction

Using data from 2019, a study by Greenpeace and WWF found that the financial sector was responsible for a total of “805 million tonnes of greenhouse gases”. This means that “if the UK’s biggest banks and investors were a country, they’d rank 9th in the world for the carbon emissions they’re responsible for.” Experts in the field have been saying for years that the only hope of avoiding global catastrophe is if national leaders and their governments come together to limit global heating, not switch their focus on and off when it suits their domestic politics to do so. However, with COP26 underway, the conflict between capitalism and climate continues, as Johnson’s proposal fails to highlight a focus on mitigating the catastrophe that the financial sector is creating.

The chief executive of WWF UK, Tanya Steele, called on the financial sector to have zero carbon transition plans that cover their global investments. She claims that “trying to set a path to net-zero emissions without tackling the UK financial sector is like sticking a plaster when the patient needs open heart surgery”. In response to this, a spokesperson for UK finance didn’t challenge the findings of the WWF and Greenpeace study, however, did suggest that “the industry will continue to work with others to help mobilise capital in a way that takes account of local community and environmental needs”.

So, how can we mobilise capital in a way that takes account of environmental needs?

We need a new economic paradigm. Standard metrics of national wealth don’t account for the environmental costs of economic growth. We must stop measuring economic progress in terms of “GDP, dollars, stock price and shareholder value”. The monetary model, first proposed in 1937, has become the standard measure of value created through the production of goods and services in any country over a set period. It’s the figure most talked about and highly prized by governments and analysts. Yet, according to its formulas, a 100-year-old carbon-capturing tree is worthless until it’s chopped down and sold as lumber. To GDP, nature has no value unless it’s sold on the commodities markets.

We are incentivising what is destroying us

It is crucial that we standardise the methodologies that businesses use to set sustainability targets. To maximise the potential of ESG policies to the environment and the economy, the number one factor that needs to change is increased transparency. Standardised disclosure would allow the financial sector to better provide clarity to both clients and regulators. Investors would still be able to focus on positive returns whilst also delivering on positive outcomes relating to ESG. Banks would then have more inclination to design sustainable solutions that, not only meet client expectations, but give businesses more focus on a shift to greener operations.

Set measures, reporting and targets would ensure that the financial industry is held to a global standard of responsibility and society would clearly be able to monitor their progress in measuring our natural assets as well as GDP.

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