Banks must commit to tackling climate change, former Bank of England governor Mark Carney warns

'They should be committed to net zero': Mark Carney tells Joel Hills why banks must do more to commit against climate change

The UN’s Special Envoy on Climate Action and Finance says some of the world’s biggest banks need to do more to demonstrate they are committed to tackling global warming.

In an interview with ITV News, Mark Carney, the former governor of the Bank of England, urged JPMorgan Chase, Wells Fargo, Goldman Sachs and a host of other international lenders to join the Net Zero Banking Alliance before COP26 begins in Glasgow in November. The Net Zero Banking Alliance was formed in April.

There are 43 founding members - among them Barclays, HSBC, Lloyds and NatWest - who have all pledged to reach net-zero emissions across their businesses by 2050 and to publish plans detailing how they will do it between 2022 and 2030.

Joel Hills presses Mark Carney on what is being doing to pressure the banks which haven't signed up to the net-zero commitment, to do so

The US banks JP Morgan Chase, Wells Fargo and Goldman Sachs - where Mr Carney worked for 13 years - haven’t yet signed up. Nor have the biggest banks in Mr Carney’s native Canada: RBC, Scotiabank, Bank of Montreal and TD.

“The question for those institutions is to get themselves in a position so they can make these commitments,” Mr Carney says.

“And, to be clear, these are serious commitments. You are committing to net zero, you’re committing to show how you are going to get there.

"You are committing to annual disclosure. Now these are all sensible things. This is what people want to see.”

Mr Carney said that COP26 in Glasgow in November is the deadline for banks to join the net zero Banking Alliance and that failure to do so would show they are “not fully committed” to tackling climate change.

Asked what his message is for the boards and the senior management at JP Morgan, Wells Fargo and Goldman Sachs, he replied: “Well, it’s very clear. There is a gold standard for net zero commitments.

"Virtually all of their business is in countries that are committed to net zero. They should be committed to zet zero and they should be part of the gold standard.”

Mr Carney is the UK’s Finance Adviser for COP26. He says it is vital that the meeting in November secures the action necessary to limit global warming to within one and half degrees.

“This meeting matters. Five years ago [in Paris] it was a success, five years previously [in Copenhagen] it was a failure.”

Mr Carney says a key measure of success in Glasgow will be getting all countries to make binding commitments to net zero.

He points out that since the UK took over the presidency, 15 months ago, the proportion of global emissions covered by some sort of net zero commitment has risen from 30% to 73%.

“There has been a big shift in momentum. I mean, America coming onboard a few months ago to a net zero, China last Fall,” Mr Carney says.

“The countries that are outside the tent are the major emerging economies… like India, Brazil and South Africa. They’re starting from a position where they are much poorer. They are still trying to industrialise and grow,” says Mr Carney. “This is why finance is important.”

“In a number of these countries, it’s still an issue of the electrification of their economies and improving living standards. They need renewable power in order to do that and on an enormous scale and that requires finance.”

In April, on the eve of President Joe Biden’s Head of State Climate Summit, The Glasgow Financial Alliance for Net Zero (GFANZ) was launched.

The agreement brings together 160 firms who are collectively responsible for $70 trillion of assets.

“It is an extraordinary amount of money, it is an unthinkable amount of money,” said Mr Carney, who chairs GFANZ. “I’ll round it down, it’s thirty times the size of the UK economy.”

Mr Carney says this money - from banks, pension funds and insurers - will fund the change that is necessary to avoid catastrophic levels of global warming.

The idea is that funding will enable consumers to retro-fit their homes, improve insulation and purchase electric vehicles. It will finance the replacement of gas boilers with heat pump or hydrogen technology.

And, with the sale of petrol and diesel cars set to be banned from 2030, it will pay for the installation of a network of electric charging stations all over the UK.

“You need country commitments and you need finance in order to to help deliver those country commitments,” Mr Carney says.

The 2020s are the “decisive decade” for the world to avert the worst impacts of global warming. Mr Carney believes progress is being made but that “we have to accelerate on the change.”

In March, a report by a coalition of NGOs - including Greenpeace and Friends of the Earth - found that the world’s 60 largest banks have increased their funding of fossil fuel extraction since the COP21 agreement in Paris.

Collectively, they have provided loans and underwritten $3.8 trillion of activity since 2015.

Oil, gas and coal will need to be burned for some years to come but there is pressure on energy companies to cut production. Last month, the International Energy Agency (IEA) said investment in new fossil fuel projects needs to end immediately if the energy sector is to reach net zero emissions by 2050.

Mr Carney is more cautious. He insists investment should be judged on a “case by case” basis, but he says that the financing of new fossil fuel extraction is “increasingly hard to justify.”

“I can’t see how you can justify new coal power generation in an advanced economy today,” Mr Carney says. “Even in an emerging economy it’s exceptionally difficult.”

Mr Carney now works for Brookfield Fund Management where he is responsible for environmental, social and governance issues. Brookfield continues to invest fossil fuel projects, like coal ports and oil sands, but Mr Carney insists he is “comfortable” with the transition the firm is making to net zero.

“Brookfield is a member of GFANZ,” Mr Carney told me. “It is one of the world’s largest renewable power operators today. It produces enough power not just to power the ITN studios but London almost twice over in terms of solar and wind.”

One of the basic principles of tackling climate change is about being more resource-efficient. It’s about reusing, recycling, reducing waste. Last week ITV News reported that Amazon is destroying millions of items of unsold stock every year.

At a warehouse in Dunfermline, not far from where COP26 will take place, we filmed Amazon disposing of laptops, TVs, drones and books. In some cases the goods were still in their packaging.

“These are the types of actions that have to be stopped. They have to be eliminated and there has to be a lifecycle approach,” says Mr Carney.

“We see other extreme examples in the fashion industry where literally perfectly good goods are destroyed. I hate to say it but that’s the extreme and that’s the easy bit. The harder bit is to design products for the full lifecycle, so they can be reused. We see some of the leading consumer products companies increasingly moving in that direction and it will become more and more common.

“We need to use our resources far, far more efficiently, we can’t afford to waste,” he added.

An Amazon spokesperson said: "We do not send a single item to landfill in the UK. Every year we donate millions of products to charities across the country.

"We’ve got more work to do but our goal is to get to zero product disposal.“

‘These are the types of actions that have to be stopped’: Mark Carney responds to ITV News's investigation which revealed Amazon is destroying millions of items of unsold stock every year

Mr Carney was critical of Amazon’s behaviour but he also said that he thought the company is “moving to net zero faster than anybody else” in the tech sector.

He believes that public attitudes about waste and about climate change have shifted and that companies and countries are under greater pressure, from customers and employees, to disclose more about their impact on the environment and to reduce it.

Most of the money required to tackle climate change will come from the private sector but governments will also need to help fund investment.

In a report commission by the prime minister, Boris Johnson, ahead of the meeting of the G7 meeting in Cornwall earlier this month, the climate economist Nicholas Stern calculated that advanced economies needed to commit to increasing investment spending by 2% of GDP above pre-pandemic levels for the rest of the decade.

Lord Stern, former World Bank chief economist and former advisor to the Treasury, believes that wealthy nations should resist calls to rein in public spending as their economies recovery from the coronavirus pandemic.

Governments around the world have been willing to borrow money, run deficits and increase national debt in response to the coronavirus pandemic. I asked Mr Carney if he thought that they should be willing to do the same to tackle climate change.

Should governments be willing to borrow and run deficits to increase investment? Mark Carney says the answer is 'yes'

“The answer is yes,” Mr Carney replies.

“Government needs to step back and it can’t continue to transfer large sums of money to individuals and to companies,” he adds.

“But what it can do and should do, in my judgement, whether it is in Canada or here, is to ensure that it supports the kind of investment that’s going to keep the economy going and building and moving us to net zero.”

Mr Carney is signalling that there needs to be some discipline but that it would be a mistake for the UK and other advanced economies to pursue a policies of austerity as growth returns.

Global emissions have fallen by around 7% in the last year as large chunks of economic activity were shut down in an attempt to contain the spread of coronavirus.

Emissions need to fall by a similar amount every year for the rest of the decade if we are going to limit global warming.

“We’re not going to shrink our way to net zero,” points out Mr Carney. “We’ve got to invest, innovate and grow.”

Goldman Sachs declined to comment on Mark Carney's remarks. ITV News has approached Wells Fargo and JPMorgan for comment but is yet to hear back.