This blog was kindly contributed by Andrew Connors, Head of Higher Education at Lloyds Bank (@LloydsBankBiz).
As the dust settles from COP26 with a myriad of new climate commitments, many are still assessing what this means for them. This year’s COP was particularly important, in that it was the first time since the Paris Agreement was signed in 2015 for countries to revisit their emission reduction targets. Back then, the world was heading toward 4-6oC of global warming. We departed COP26 with governments’ revised targets on a lower pathway toward 2.4oC – which is progress, but not enough to mitigate some of the worst impacts of climate change. Yet, COP26 has claimed its ability to keep the Paris Agreement 1.5oC target within reach – with over 90% of the world’s GDP now covered with an ambition to reach net zero by mid-century. Here in the UK, we have more clarity than most countries – with the Government having already published its Net Zero Strategy, deemed by some analysts as the most comprehensive net zero roadmap to-date.
However, whilst the focus of the mainstage negotiations at COP was visibly political, it was underpinned by countless hours of academic endeavour. At COP we saw the vast input from the higher education sector through its research, guidance, and applied expertise but furthermore through the sector’s own commitments to tackle climate change head on. One thing is clear; higher education is and always has been a key enabler of meaningful action on climate change.
Finance is perhaps a newer player at the centre of the COP limelight and in Glasgow its contributions were elevated to the mainstage. Many announcements focused on the pivotal role it plays to enable the wider economy to transition particularly through the sector’s own climate action. The Glasgow Financial Alliance for Net Zero (GFANZ) is one such initiative covering 40% of world’s total financial assets since its launch in April 2021, representing total assets of over $130trn committed to achieving net zero by 2050 or sooner. GFANZ has committed to use rigorous science-based scenarios and advisory panels collaborating with NGOs and experts to track climate progress, including establishing nearer-term targets. In addition to this, the Chancellor Rishi Sunak announced plans for the UK to become the world’s first net-zero aligned financial centre – supported by a breadth of new mandates and regulations.
What does this mean for financial institutions? Charlie Nunn, our new chief executive at Lloyds Banking Group, described our role through three themes: partnerships, prioritisation and pace.
- Partnerships – because we must work more innovatively together, across government, industry, and higher education through investment in the development of new technology, pricing, and policy change at a national and regional government level.
- Prioritisation – because whilst the full course of transition is not fully known we can and must act today by prioritising the practical changes we can finance now that lead to the greatest impact.
- Finally, the pace of change needed is astonishing. To meet our collective commitments, we must change at a rate not yet seen before.
The higher education sector will be a key partner for the financial sector and many actors across the economy – as educators, innovators, policy shapers, and enablers of collaboration and deep interdisciplinary wisdom. However, your own journeys to net zero will be crucial because of the space that higher education institutions occupy as prominent members of their communities around the UK and globally. At a recent dinner hosted by HEPI, we were pleased to join with representatives from the higher education sector to discuss some of these challenges face to face, including the huge cost of meeting net zero commitments, which is particularly challenging for this sector given the scale and age of so much of its real estate. Given this, our discussions with universities at present are focussed on three key areas.
- Firstly, the provision of funding for the transformation of estates to meet net zero commitments. It is clear we are looking at tens of millions for some, and hundreds of millions for others, and institutions will need to partner with their funders to achieve this.
- Secondly, we are helping institutions write their own financing frameworks to align to their sustainability ambitions.
- Finally, we have invested in an interactive digital tool, which is free to use for all universities, to help better understand estates footprints and identify appropriate energy efficiency investment for buildings.
It is clear the finance sector will have to work hand in glove with the higher education sector to support the UK’s transition to a low-carbon economy. We already know that the sector, and the world class expertise it contains, has been integral to the sustainability journey of many financial institutions to date. As an example, Lloyds Bank has been working in partnership with the Cambridge Institute for Sustainable Leadership for over ten years. They have supported the Bank as it has evolved its strategy and governance relating to climate change and sustainability, including upskilling bankers around the risks and opportunities presented by climate change through an accredited training programme. The higher education sector must remain a key ally as financial institutions continue upskilling our teams, pioneering new products, and focusing support and innovation where the UK needs it most.
Some of HEPI’s other recent output on issues related to climate change can be found here, here and here.