by Abi Siri Andersen
No green strings attached
On 22nd January, the Environmental Audit Committee chair Philip Dunne MP wrote a letter warning that the Bank of England is “at risk of creating a moral hazard by purchasing high-carbon bonds and providing finance to companies in high-carbon sectors without placing any conditions on them to make a transition to net zero.”
The letter asks BoE governor Andrew Bailey to require those companies receiving millions of pounds of taxpayers’ money in Covid-related bailouts to publish climate-related financial disclosures. High carbon emitters such as airlines and car manufacturers have received billions in the Bank’s Covid relief scheme.
So far, there have been no green strings attached.
The BoE’s own financial disclosures reveal a £20 billion corporate bond purchase scheme that is misaligned with the goals of the Paris Agreement. In August the New Economics Foundation reported that the Bank’s Corporate Bond Purchase Programme invested £11.4bn of its total £20bn in energy-intensive and high-emitting sectors, such as fossil fuels. The programme was doubled from its pre-Covid level of £10bn to help shore up the UK economy, but it certainly wasn’t focusing on a green recovery.
In his letter Dunne writes: “The Bank’s corporate bond purchases are currently aligned with a catastrophic 3.5C temperature rise by 2100, far exceeding the Paris agreement goal of limiting global warming to 1.5C” and the Bank’s very own 2020 climate-related financial disclosure report confirms this.
If the Bank of England ignores these recommendations, it would not only undermine the UK's diplomatic leadership on climate change ahead of November’s COP26 Climate Summit in Glasgow, but also the Government’s call for a green recovery from the Covid-19 pandemic. Dwarfing both of these acts of self-sabotage, and infinitely worse, sticking heads in the sand ensures that the continued growth in emissions caused by the UK will bring economic, social and physical downfall to millions of people threatened by climate change long before 2100 and most probably before 2050. Those who have made this destructive decision will live to see the consequences.
Hypocrisy in action
According to Climate Action Tracker, as of September 2020, only 2% of the UK economic recovery funds were allocated to climate-related measures, compared to 30% of the EU’s latest 2021-2027 budget and associated recovery package. This statistic, coupled with the Government’s recent decisions to back Drax’s gas plant and a new Cumbrian coal mine, go against its own green rhetoric.
In 2019 the then business secretary Andrea Leadsom granted planning permission for Drax's 3.6GW gas plant in Selby, overruling contrary advice from the UK's planning authority, undermining the UK’s climate targets and locking in high-carbon infrastructure. Environmental law group ClientEarth legally challenged the government’s decision, ClientEarth arguing that once fully operational, the Drax project could account for up to 75% of emissions from the UK's electricity sector, but were defeated in the Court of Appeal in January 2021.
The government’s decision to approve a new coal mine in Cumbria also runs contrary to the UK’s climate goals and diminishes the UK’s credibility as a leader in the fight against climate change. BEIS Secretary Kwasi Kwarteng’s admission that there “is a slight tension between the decision to open the mine and our avowed intention to take coal off the gas grid” seems rather an understatement. The government’s chief planning officer Joanna Averley, backed by planning minister Robert Jenrick, continues to call this a “local issue”.
This is in stark contrast to the new administration across the pond. In his first few days in office Joe Biden has mobilised every department and agency of the United States government to focus on climate. He has aimed his decisive agenda at investors in fossil fuels, as stated by US climate envoy John Kerry: "If we're going to invest new money, let's invest it in clean energy, invest it in clean jobs, invest it in those technologies and other things that will build the future, rather than simply being the prisoners of the past." Biden recognises that our reliance on oil, coal and natural gas is not a local issue.
Green light at the end of the tunnel
Despite the lack of regulation from Government, there is positive news in the UK private sector. A recent analysis of 338 companies by the Science-Based Targest Initiative (SBTi) shows how ambitious science-based targets are delivering on Paris-aligned ambitions, reducing carbon emissions at scale. These companies span all major sectors and have collectively reduced their emissions by 25% since 2015.
The UK was the first major economy to pass a net zero emissions law, requiring the UK to bring all greenhouse gas emissions to net zero by 2050. The UK also has a 68% domestic emissions target of 2030 and is in a small group of countries banning the sale of internal combustion engine vehicles by 2035. This is progress, but there is so much more to be done.
Here at Green Angel Syndicate, we believe in radical grassroots innovation to slow down, arrest and then reverse global warming. This is why we invest in entrepreneurs with the passion, ability and know-how to foster this transformation.
However, angel investors cannot carry the burden of carbon innovation alone and unaided.
The UK Government must ‘show leadership’
Business leaders have called for a ‘paradigm shift’ in the Government's approach to tackling climate change and renewable innovation. We need the Government to commit a serious amount of support and resources to help carbon-heavy sectors transition into clean technology innovation, as recommended by the International Energy Agency. Surely the promised 500 new jobs created by the Cumbrian coal mine could also be created by investing in renewable energy and carbon-cutting technology?
The onus is not only on the BoE, but on the Government to show real commitment to ‘building back greener’. In his letter to the Bank of England, Dunne copies in the Chancellor of the Exchequer. His request for the Bank to ‘show leadership’ on climate change is surely also a nudge for Rishi Sunak to deliver on green promises in the spring Budget.
As of December 2020, the National Audit Office estimates the total cost of Covid-19 measures for which central government departments are responsible to be £271 billion. The £12 billion earmarked for the UK’s ‘green industrial revolution’ pales in comparison.
As the only angel investment syndicate in the UK specialising in the fight against climate change and global warming, Green Angel Syndicate calls on the UK Government to do the following:
Abi Siri Andersen is Communications Manager with Green Angel Syndicate, the only angel investment syndicate in the UK specialising in the fight against Climate Change and Global Warming. For regular updates follow Green Angel Syndicate on LinkedIn and Twitter.