Any mention of carbon output naturally brings to mind cooling towers belching out clouds of grey and queues of lorries causing a heat haze shimmer with their exhaust fumes. You could be forgiven for thinking that seemingly “clean” sectors like tech and finance contributed very little in terms of carbon and therefore the climate catastrophe we’re now finally facing up to.
So it was fascinating when Greenpeace and WWF released a report which found that UK financial institutions were essentially funding 805 million tonnes of CO2 in 2019. Put another way, by providing loans and investments for projects and companies, banks and financiers had helped to generate carbon which was nearly double the UK’s own annual net emissions for the same year, which totalled 455m tonnes*.
Through their investigations and the publication of the report, Greenpeace and WWF sought to make the banks responsible for the carbon they’re financing and profiting from. It’s an interesting principle and one which echoes the approach of the UK government in encouraging companies to take responsibility for their upstream and downstream supply chains, as revealed in Procurement Policy Note 06/21. You can read a simple breakdown in our blog but essentially the government will only now award contracts worth £5m+ per annum to companies that are committed to carbon reduction in their own business and in their suppliers and customers.
It’s interesting to see this philosophy of making businesses responsible for the actions of others trickling from one area to another. In developing our carbon assessment platform, Carbon Click, we viewed the customer-supplier relationship as having potential to exert a positive influence, resulting in carbon reduction. What is evident now is that there’s an expectation which goes further – is indeed stronger in its intentions – and that such relationships must in fact be used to compel others to reduce their impact on the environment. Going back to finance, the UK government intends to become the first in the world to require companies to report their impact on the environment according to the Task Force on Climate Change Financial Disclosures, by 2025.
This is now beginning to have real world impacts. The outcome – no doubt intended – is that the banks are now asking questions around carbon output when considering loan applications. The implication is that they’re becoming less willing to lend money to or invest in companies with a poor environmental record and many are reporting in detail on the amounts they are investing into different types of business. Again, this encourages such companies to put their house in order when it comes to greenhouse gases and other outputs, if they want support to help them grow.
Don’t be surprised if the thumbscrews are applied more tightly over time. This feels like the first steps along this road and there’s more to come, especially if we’re to hit net zero as a nation by 2050.
- Discounting aviation and shipping, sectors that the UK government also does not include in its emissions calculations