Environment Audit Select Committee launches inquiry into finance and the UK’s transition to net zero

The House of Commons Environment Audit Committee (EAC) has launched an inquiry into the role of the financial sector in the UK’s transition to net zero. 

The press release from the EAC particularly highlights the Glasgow Financial Alliance for Net Zero (GFANZ), which was launched at President Biden’s climate summit in April 2021 by Mark Carney, UN Special Envoy for Climate Action and Finances.  

The press release says: 

"Given the global reach and total assets covered by GFANZ initiatives, and the potentially pivotal role of UK financial institutions in supporting reductions in fossil fuel extraction, EAC considers such initiatives as crucial in determining whether the UK Government’s carbon budgets and its net zero target are likely to be met."

EAC Chair, Rt Hon Philip Dunne MP, said:

“Mobilising financial institutions to support decarbonisation of the economy, for instance through the work of the Glasgow Financial Alliance for Net Zero, has been a key feature of the UK’s COP presidency. A year on from when Mark Carney launched the GFANZ initiative, our Committee is keen to explore how this work can be most effective at driving down global emissions. Collectively, the alliance represents nearly 40% of global private financial assets, and represents an enormous opportunity to influence meaningful action to cut emissions and support renewable energy generation.

I encourage anyone with views on the role of private finance in decarbonising the economy to submit evidence to our Committee.”

The terms of reference for the review are very broad and include: 

• Corporate approaches to the financing of existing and planned fossil fuel projects;
• The potential effectiveness of the financial sector, including through alliances such as GFANZ, in encouraging the decarbonisation of the economy in time to limit global temperature rises to 1.5°C;
• Pathways to reducing investment in fossil fuel extraction;
• Current and planned investment in renewable energy generation, distribution and storage;
• The effect (if any) on the pace and scale of disinvestment plans of disruption to supply chains and energy markets arising from the 2022 Russian invasion of Ukraine, and what is being done to mitigate any such effects, and 
• Likely pathways to the responsible retirement of fossil fuel assets, in a way which is compatible with the UK’s national interest, reducing the risk of stranded assets and meeting the UK’s international climate obligations.

Written submissions are invited by 5pm on Thursday 30 June 2022.

Omar Salem is a Managing Associate in the Financial Regulation Group, Linklaters, London