The role of the finance in driving the net-zero transition is set to be examined by MPs as a major debate rages on over the effectiveness of environmental, social and governance (ESG) investment.
The fresh inquiry, led by the Environmental Audit Committee, is calling for top financial institutions in the UK to clarify their fossil fuel policies and policies on investment in renewables, as well as whether geo-political events like the war in Ukraine have impacted their stance on fossil fuel investment.
Concerns have grown over the fact that few nation states and financial institutions have committed to rapidly phasing out fossil fuels and fossil fuel investments, which the committee said would be key to driving action on emissions globally.
The new inquiry will form part of the UK’s year long presidency of COP26 and will look to galvanise members of the Glasgow Financial Alliance for Net Zero, which manage assets of over $130tn, to invest in net zero.
Chairman of the committee, Conservative MP Philip Dunne, said: “A year on from when Mark Carney launched the GFANZ initiative, our Committee is keen to explore how this work can be most effective at driving down global emissions,” he said.
“Collectively, the alliance represents nearly 40 per cent of global private financial assets, and represents an enormous opportunity to influence meaningful action to cut emissions and support renewable energy generation.”
The inquiry comes as major debate rages on over the effectiveness of ESG investing, after HSBC’s global responsible investing chief downplayed climate concerns earlier this month and said “there’s always some nut job telling me about the end of the world.”
Kirk was suspended by the bank pending investigation but his comments have sparked heated debate among investment circles.
Pioneer of the ESG label, Paul Clements-Hunt, told City AM last week that the uproar showed that investors were growing sceptical of the reality behind investment strategies that are packaged as responsible and sustainable.
“Marketing sustainability, green and ESG, however an asset manager wished to package it, was an easy win for asset gathering over a couple of years or more,” he said.
“But increasingly managers will be held to account as policy-makers, prudential oversight institutions and regulators seek to end a Klondike gold rush for easy assets.”