UK ushers in $130tn in net zero commitments and new climate fund

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UK ushers in $130tn in net zero commitments and new climate fund
Chancellor of the Exchequer Rishi Sunak is to announce a new fund that will use reflows to help it issue green bonds worth billions of pounds in the City of London. Photo: PA

UK chancellor Rishi Sunak is set to outline ambitious plans for the UK to become the world's first net zero-aligned financial centre.

This means UK financial institutions will have robust firm-level transition plans, setting out how they will decarbonise.

He will announce the launch of an "innovative" new financing mechanism — the Climate Investment Funds’ Capital Markets Mechanism (CCMM) — that will boost investment into clean energy like solar and wind power in developing countries.

This new fund will use reflows to help it issue green bonds worth billions of pounds in the City of London and could leverage an extra $30-70bn from other sources for specific clean energy projects.

The Treasury also said that, as COP26 continues, the UK will usher in climate commitments from private companies covering $130tn of financial assets on Wednesday's Finance Day at COP26. These are worth about 40% of the world's total financial assets. 

Watch: What is net zero?

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These commitments will help to create a huge pool of cash that could fund the UK's net zero transition, including the move away from coal, the shift to electric cars, and the planting of more trees.

Pledges come from more than 450 firms from all parts of the financial industry, based in 45 countries across six continents, and have been delivered through the Glasgow Financial Alliance for Net Zero (GFANZ), which was launched by the UK to harness the power of the financial sector in the transition to net zero.

Convening the largest ever meeting of finance leaders on climate change, Rishi Sunak will set out the UK’s “responsibility to lead the way” and unveil a fresh push to decarbonise the UK's world-leading financial centre.

Under the proposals, there will be new requirements for UK financial institutions and listed companies to publish net zero transition plans that detail how they will adapt and decarbonise as the UK moves towards to a net zero economy by 2050.

To guard against greenwashing, a science-based "gold standard" for transition plans will be drawn up by a new Transition Plan Taskforce, composed of industry and academic leaders, regulators, and civil society groups.

Read more: UK's second green gilt raises another £6bn

Sunak is also set to highlight that the $100bn climate finance target will be met by 2023 and urge developed countries to boost their support to developing countries — including by helping them tap into the trillions of dollars committed to net zero by the private sector.

In total, the UK will spend £576m on a package of initiatives to mobilise finance into emerging markets and developing economies, including £66m to expand the UK’s MOBILIST programme, which helps to develop new investment products which can be listed on public markets and attract different types of investors.

Watch: What are the key takeaways from Rishi Sunak's budget?

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