James Close (Head of Climate Change at NatWest) commented in a recent podcast for Sustainable Scotland, that COP26 could be the COP to 'galvanise the private sector'.
I could not agree more with this sentiment. I think this year's conference represents an exciting opportunity for sustainable finance in the private sector, and one which might be arising at the perfect time.
What I hadn't considered before joining the AG finance team was the depth and breadth of impact that finance has on businesses. It seems obvious once you consider it – given that the vast majority of businesses require some iteration of finance.
In the future I think having a credible sustainability strategy and track record of progress on transition will become almost a prerequisite to affordable debt finance. In this way, banks can take an activist role in driving businesses to act against climate change. If sustainability strategies are set in relation to carbon emissions, we can expect to see real change in the private sector as a direct result.
This isn't to say that there aren't challenges ahead. In a post-pandemic world how do companies set appropriate targets for reducing their carbon emissions? The previous year cannot be used as a reference, but with a move towards flexible working, setting targets based on pre-pandemic levels hardly seems appropriate. And then there's the question of how you accurately assess supply chain carbon emissions, and at what point the only solution truly is carbon offsetting.
But these challenges don't negate the need to take concrete action. Across my generation, banks are associated more with the 2008/09 financial crisis than as drivers of positive societal changes. The coming weeks, months and years have the potential to see banks and financial institutions reframe their reputation as being the catalysts for positive change.