The City is distracted. Climate crisis inaction will cost us everything
The City can’t afford to make the climate crisis a tomorrow problem, writes City of London Corporation policy chairman Chris Hayward
As the tremors of macroeconomic and geopolitical uncertainty are felt in every world capital, it’s easy to focus exclusively on immediate and short-term challenges.
While understandable, this is, in the longer-term, profoundly mistaken.
The climate crisis, and our response to it, has arguably been the victim of this dynamic. Our changing climate and deteriorating ecology are constant, fundamental threats to human society as we know it, but too often this most critical of issues has been sidelined or relegated – put on tomorrow’s to-do list.
Both the science and the economics are clear – we stand at a historic crossroads, where the costs of inaction are catastrophic and action more urgent than ever.
According to the World Economic Forum, climate change has caused more than $3.6 trillion in damage since 2000. What’s more, the Forum estimates that, without action soon, global GDP could drop cumulatively by up to 22 per cent by 2100.
From financial services to pharmaceuticals, insurance to energy and agriculture – no industry will escape the effects of an exacerbating climate crisis, and changes in governmental policy, around the world, won’t change those facts.
But in addressing today’s Net Zero Delivery Summit, which the City of London Corporation hosts for its fourth year and kicks off London Climate Action Week, I will be arguing that there is real, transformative economic opportunity for the UK in addressing the global climate crisis.
In fact, I’ll be re-emphasising the City of London Corporation’s commitment to action. Only by doubling down on sustainable finance can we accelerate the net zero transition and spur our national growth.
Sustainable finance presents opportunity for the City
Sustainable finance is a broad term. But I see four key areas as particularly primed for growth and scale.
Transition finance is the first – crucial because it recognises that in our journey to net zero we need to bring everyone along, and it is those hard-to-abate industries that need the most support.
Recognising the importance of this area, we were pleased to launch and host the Transition Finance Council alongside government.
Chaired by Lord Alok Sharma, the Council will work to accelerate transition finance flows and reinforce London’s status as the preeminent centre for transition capital raising.
Climate finance and nature finance are the second and third areas which we have identified as poised for dramatic growth – and both will prove indispensable as we work with partners in emerging markets to help them adapt to climate change, mitigate its effects, and preserve the natural capital which underpins so much of human society.
The fourth real area of opportunity is in carbon markets. Here, it’s a case of converting clarity into action.
We have the policy foundation needed for a credible carbon market to increase the flow of private capital to support progress on net zero. Both internationally, through Article 6 developed at COP29 in Baku, and domestically via the government’s publication of its six principles for voluntary carbon and nature market integrity – the time has come for real action.
UK companies will lose £1 trillion to climate crisis
The economics of climate mitigation and adaption have not changed. Not for the world, and not for the UK.
Indeed, the scale of Britain’s economic net zero transition opportunity is hard to overstate: McKinsey estimates it will be worth £1 trillion to UK companies by 2030.
By exporting UK expertise and mobilising the capital so badly needed to address this era-defining challenge, we can drive our national prosperity and competitiveness.
Already a global leader in sustainable finance, the City must renew its leadership in the net zero transition by doing what it does best.
Our financial and professional services have a global role to play in addressing the climate crisis.
For the economic and ecological inheritance of our children and grandchildren, it’s an opportunity we cannot afford to miss.
Chris Hayward is the policy chairman of the City of London Corporation