30th Sep 2020

Fossil fuel funding too high, British bank chief says

  • The outgoing head of the Bank of England, Mark Carney, said that the stated efforts to curb funding in fossil fuels have been 'not shifting quick sufficient' (Photo: Bank of England)

The outgoing head of the Bank of England, Mark Carney, warned on Monday (30 December) that the shift in the financial sector towards sustainability is far too slow.

Carney, who will take up a role next year as the United Nations special envoy for climate action and finance, said that the stated efforts to curb funding in fossil fuels have been "not shifting sufficiently quickly" and the assets in the sector could end up "worthless".

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Carney pointed out that companies and financial institutions with investments in fossil fuels would "have to make the judgment and justify to the people whose money it ultimately is".

"The concern is whether we will spend another decade doing worthy things, but not enough," he said in a BBC Radio 4 interview.

Environmental groups and some politicians in Europe have recently questioned the possibility of running a capitalist economy without threatening the future of the planet.

However, according to the chief of the Bank of England, it is reasonable to question where the role of the state ended and what the role of markets was to reduce the impacts of climate change.

"To deliver, there needs to be shared understanding about what's necessary," he added.

'Tragedy of the horizon'

"A question for every company, every financial institution, every asset manager, pension fund or insurer: What's your plan?," Carney said, warning that firms will have to do their part to preserve solvency.

Climate change is what he called a "tragedy of the horizon," since extreme weather events were inevitable.

"In those horizons, there will be more extreme weather events, but by the time that the extreme events become so prevalent and so obvious it's too late to do anything about it," he said.

"We look to political leaders to start addressing future problems today," he added.

Meanwhile, the European Environmental Agency (EEA) warned the European Union that investing in sustainability and stopping funding for environmentally damaging activities, especially fossil fuels, was needed to tackle the negative consequences of climate change.

Europe will not achieve its 2030 climate and energy targets "without urgent action during the next 10 years," an EEA report concluded.

Additionally, the EU managed to agree on a common classification system for environmentally-sustainable investments.

The agreement is the first step to set a framework for sustainable finance that will help investors and consumers to identify economic activities which can unambiguously be considered environmentally green.

However, the "green" taxonomy was expected to be in place by the end of 2021 and to ensure its full application only by the end of 2022, which environmental groups criticised "given the urgency of the climate crisis".

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