Bishop of Durham urges Government to keep UK a global leader in green finance

On the 18th January 2018 the House of Lords debated a motion from Lord Teverson that “this House takes note of the case for the United Kingdom to remain a global leader for green finance, and for the United Kingdom’s financial sector to be resilient to climate change.” The Bishop of Durham, Rt Revd Paul Butler, spoke in the debate:

The Lord Bishop of Durham: My Lords, I add my thanks to the noble Lord, Lord Teverson, for securing this debate. This year’s COP 24 UN climate change conference will be a crucial opportunity for the world to accelerate its climate ambitions in order to try to meet the 1.5 degree Paris commitment. This country faces a choice: do we want to lead the charge on this or drag our heels somewhere near the back? I welcome the UK Government’s recent focus on environmental issues. Initiatives such as the green finance task force, the endorsement of the Financial Stability Board’s task force on climate-related financial disclosure and the UK’s setting up of the Powering Past Coal Alliance at COP 23 all show how we are influencing discussions at global climate change meetings.

Good progress is being made, but there is more that the UK can do to be a global leader in green finance. This is an effort that requires the leadership and hard work of the Government—and, crucially, as other noble Lords have noted, the co-operation, collaboration and initiative of private business. Vital to this is recognising that sustainable business is good business. The idea that a business model that incorporates environmental and social responsibility is in conflict with financial results and the bottom line is simply a fallacy. A business that manages environmental and social issues well is a more sustainable one, even if the results take a little longer to bear fruit. Businesses and banks have much to gain from the growth in the market for renewables and from reducing their exposure to the risks associated with lending for fossil fuels.

Sustainability starts with transparency. There must be a culture change in financial reporting methods so that companies disclose to shareholders and investors the full extent of their carbon footprint and how they are working to reduce it. This was the recommendation of the Financial Stability Board of the G20 last year. I am proud to say that the Church Commissioners were ​recently successful in passing a shareholders’ resolution asking the oil giant Exxon to report on how its business model will be affected by global efforts to limit the average rise in temperatures to below 2 degrees centigrade. As Christians, we in the Church recognise that humanity has a God-given responsibility for the stewardship and care of the earth and its creatures, and this is just one part of embracing that responsibility. Several of Exxon’s peers, including BP and Shell, have already followed suit, sending out a very strong signal that investors expect businesses to integrate climate change considerations into their business strategies and disclosures. Crucially, however, these disclosures are not mandatory for all companies. Will the United Kingdom Government consider introducing mandatory carbon emissions reporting for companies to ensure that investors have all the information they need?

While transparency is necessary at a basic level, we need to be much bolder than this, investing in green energy in creative, new and dynamic ways. It is an uncomfortable reality that, even if the Paris pledges are implemented in full, we will probably not keep warming below the 2 degree goal. Far more investment is needed in low carbon and other sustainable infrastructure and technologies. Once again the UK must lead the way on this and work to make the capital markets greener through good policy. There is a real need here for vision, policy stability and clarity in long-term policy objectives. Up to now, UK renewables policy has been riven by inconsistencies and some stops and starts. The Government’s recent sale of the Green Investment Bank, which might have overseen much of this innovative investment, leaves Britain without a key vehicle for supporting green projects. I find this a disappointing decision for a Government who are supposedly committed to green finance and combating climate change.

While much progress has been made in decarbonising current UK power supply, long-term decarbonisation policy for areas such as transport and housing, in particular, is far less clear. The Institutional Investors Group on Climate Change in a report in 2017, for example, recommends implementing binding regulations to ensure that all new homes and commercial buildings are near zero emissions. An encouraging step in the right direction in respect of transport was the announced intention to ban the sale of new petrol and diesel cars and vans from 2040. I will ask the Minister two questions. First, when can we expect to see clear policies for both homes and commercial properties to have zero emissions? Secondly, might the Government consider that the 2040 date for banning the sale of new petrol and diesel cars is not bold enough? Should they bring this forward to 2030?

While we must consider our investments in energy at home in the UK, we know that climate change is a global phenomenon. Therefore, we must think ambitiously and thoughtfully about our energy investments overseas, particularly in poorer and developing nations. Indeed, as we know, climate change is disproportionately impacting on the poorest and most marginalised people in the world. Not only our environmental responsibility but our social responsibility and commitment to justice call for urgent global action to ensure equitable access to enriching and sustainable development.​

DfID is doing excellent work in helping people to access clean energy overseas—for example in its Energy Africa campaign, which focuses on off-grid solar energy. However, recent figures from CAFOD show that the UK Government overall are still spending more on fossil fuels than on renewable energy in developing countries. Will the Minister commit to investigating how more support can be given overseas for renewable energy and less for fossil fuels, particularly in developing nations?

As I said in my opening remarks, for our financial sector to be resilient to climate change, the impetus cannot come exclusively from a government-only initiative. It requires the collaboration and full commitment of the entire financial sector. As yet no UK bank has produced a clear transition plan for energy financing. Banks have a vital role to play in the shift to clean energy—in investments both at home and overseas—since renewable energy companies are typically more dependent than fossil fuel companies on bank financing. This is particularly true in developing countries. Yet many are complicit in using customers’ money to finance projects that are literally fuelling climate change. HSBC, for example, has provided $45 million of bank guarantees to Adaro Energy, which is one of Indonesia’s largest coal producers.

Having said this, there is reason to be hopeful, and there are some excellent examples of good practice. In 2015, Barclays participated in loan syndicates that provided more than $1.3 billion in direct project financing to six large-scale renewable projects in South Africa, including three wind farms and three solar plants. I commend Christian Aid’s Big Shift campaign, which calls on the UK’s largest high street banks to ensure that their lending practices are in line with global climate ambitions, setting ambitious and measurable targets to increase lending to renewable energy projects while decreasing loans to fossil fuel companies. Here is another excellent example of how civil society can engage with making a real difference on this issue.

Though there are clearly many opportunities to invest in large-scale renewable energy, small-scale and off-grid energy systems often make the greatest difference to poor people in rural and isolated communities by providing clean and safe energy for household cooking and lighting. In Burundi, for example—a country with which I have close links and which I regularly visit—Christian Aid, in partnership with COPED, is working on a renewable energy pilot where the by-product from processed palm oil is converted into a fertiliser from which thousands of families are benefiting. There is a pressing need to scale up financing for such small, local projects. Indeed, it will be essential that developing countries are helped at every stage to ensure that they use energy far more wisely than we, as developed nations, have done. We dare not suggest that they hold back from development as they seek to build better lives for their people—but they can be helped to avoid the major environmental mistakes that we have made on our development pathway.

While the shift in financial investment is ultimately down to the banks themselves, I would argue that the Government have a considerable role to play in encouraging this. In addition to putting in place frameworks for mandatory disclosure of carbon footprints ​and other climate-related information at both individual company and portfolio level, a phasing out of fossil fuel subsidies, and ensuring that the fossil fuel industry has a limited influence in determining the price and mechanism when implementing carbon pricing, would all go a long way towards making the British financial banking sector a global leader in green finance, and resilient to climate change.

We must remember that part of being a global leader in green finance means thoughtfully using the global influence that we already have. So finally I ask the Minister: how is the UK using its influence with the World Bank and other multilateral development banks to persuade them to invest less in fossil fuels and more in renewable energy? Green finance matters for the whole world. Let us not drag our feet in any way in developing it well.

Lord Dykes (LibDem):  …I thank the right reverend Prelate for his very important remarks: they showed his remarkable expertise on this subject. We are grateful for what the Church has been doing.

Baroness Featherstone (LibDem):  …Finance flows mostly in rational directions—mostly. As was mentioned by the right reverend Prelate, we still have a raft of perverse subsidies, for instance fossil fuel subsidies, which make it economically sensible for money to flow into exactly the kind of activities that we are trying to wean ourselves off. The debate about needing to see an end to renewable subsidies always misses this point, yet it is a huge distortion in the market.​… The right reverend Prelate reminded us of the Christian commitment to the stewardship of our planet.

Lord Mendelsohn (Lab): …We are starting to promote electric vehicles. The right reverend Prelate the Bishop of Durham talked about sales of petrol and diesel vehicles ending by 2040. We have a massive issue with millions of lithium-ion batteries that will need to be recycled or reused each year, as required by existing law. Indeed, we have no such facility in the UK and we have to think about what our requirements will be over time.

The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)… It is only natural that the United Kingdom is well placed to build on our global leadership in green finance, which is what we want to do. It is an important part of the United Kingdom’s leadership in tackling climate change. I assure the right reverend Prelate and others that we want to show leadership in tackling climate change, because green finance matters to both the financial and climate change agendas, domestically and internationally. I assure noble Lords that government work on green finance does not take place solely within the Department for Business, Energy and Industrial Strategy, which I have the honour to represent here.

On the international stage, the Bank of England is co-chairing the G20 sustainable finance study group with China, and government as a whole has established formal green finance partnerships with Brazil and China. Domestically, BEIS and the Treasury both work in close collaboration on green finance, and at official level the work has received support from 11 different departments so far.

We have also seen significant leadership on green finance from the private sector. Barclays recently listed a €500 million green bond and HSBC committed to provide $100 billion of financing and investment to develop low-carbon technologies and projects. The London Stock Exchange has attracted more than 60 green bond listings, raising over $20 billion in seven different currencies. We want to do all we can to encourage the profitability of green finance. I reassure the right reverend Prelate that we want London to be the leader of that. Indeed, as that famous Londoner, the great lexicographer Dr Johnson, so eloquently put it many years ago:

“There are few ways in which a man can be more innocently employed than in getting money”.

We want the City to continue to do that in green finance as well.

Lord Teverson: … The right reverend Prelate spoke about social responsibility and particularly the role of DfID, which I did not mention but is incredibly important.



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