Glasgow requires a ratchet up from Paris. How are we doing on the NDC (Nationally Determinded Contributions) submissions?
The point that we’re at now is the place where we were intended to be when the Paris agreement was conceived. The idea was that in five years—which turned out to be six, due to the pandemic—countries would re-submit their NDCs with greater ambition; ambitions driven by the reduced cost of the technologies that will drive the transition, the science that is telling us about the urgency of climate action and also the increased awareness of citizens to the challenges we face, and their willingness to be part of it.
All those conditions are in place. What’s disappointing at the minute is that those NDC submissions, according to the UN Synthesis Report, are leading us to an increase in emissions (from 2010) of around 16 per cent by 2030, when we need to halve emissions by 2030 to get to net zero by 2050.
It is still, however, all to play for. Some of the big emitters can shift the dial quite dramatically if they put ambitious NDCs forward.
One of the other objectives is around delivering promises, especially in regard to climate finance. Why is this so important?
At COP15 in Copenhagen, the global north—countries that had benefited greatly from the growth that was responsible for a huge proportion of the emissions going into the atmosphere—made a commitment to transfer funds to the global south, which had contributed least to global emissions. There was a recognition that those developing countries faced the additional challenge of having to develop without the benefit of fossil fuels, which were the cheapest form of energy at the time. The idea was that this finance, in part, would help to address this imbalance. The Paris agreement codified the concept. A lot of work has been done to identify these flows of finance and to see where we are today, which is around $80bn per year. It’s really important that those promises are kept. There is still a gap to be closed.
The $100bn per annum is mainly public finance. How does private finance sit alongside that?
It’s technically a combination of both, but the essence of that $100bn is that it is highly concessional. The $100bn is nowhere near enough to achieve its two objectives: to reduce the carbon emissions from new power generation, and to mitigate against the damage done by the climate change that has already happened. We need to turn those billions into trillions. That’s where private finance comes in. It can help emerging markets and developing economies develop resilient infrastructure that protect against changing temperatures and rising sea levels, and to help decarbonise those economies as quickly as possible.
natwest is a founder member of GFANZ (Glasgow Financial Alliance for Net Zero). Why is GFANZ important?
Mobilising money towards a net zero future requires an alignment between all financial actors. It is important to bring the weight of money that sits with asset owners such as pension funds and insurance companies together with the people who translate our savings into investments, like fund managers, and the banks that support businesses. The aggregation of financiers through GFANZ means that the whole sector is working together and facing in the same direction, away from short-termism and towards climate action and carbon reduction.
How do you see the narrative for COP?
The interesting thing about the narrative is that it has always been about the cost of the transition, because fossil fuels were cheaper than renewables. In the years since Paris that narrative has flipped. Once the investment in renewables has taken place the energy they produce is effectively free. This is an opportunity to take advantage of the significant amounts of additional financing and convert it into lower cost, cleaner energy. I think the narrative is one of finance enabling an accelerated transition.
What does that mean for NatWest?
For us it’s a huge opportunity to be part of the transition and to finance it for the UK, which has got some very ambitious targets. In order to take advantage of that opportunity we need to demonstrate that we’re a credible player. We have put our own house in order and are now net zero across our own direct operations. We are reducing our emissions across our estate, which has given us access to some great technology and reduced running costs; we’ve offset our residual emissions to the point that we are at net zero now. The big part of our business is of course our financed emissions. We have declared that we want to halve the climate impact of our financing by 2030. To do that we’ve analysed where our emissions sit on the balance sheet today so that we can work out what to do with them in the future.
We can use the knowledge that we now have to work with our customers and look at decarbonising their businesses and investments, as well as having the ability to form great partnerships. Partnership-thinking, clarity of direction and the willingness to work with customers through the changes gives us a really positive direction of travel to take advantage of this transition.
How can NatWest support the government’s objectives as COP-President designate?
The UK has a tremendous challenge to use global diplomacy in a way that makes COP26 a success. As principal banking sponsor, we are able to demonstrate that, as a UK bank, we can support the UK’s ambitions to drive this transition rapidly through the goals that the government has set. We can also demonstrate our ability to build partnerships and momentum, particularly with some of the harder to abate sectors. For example, we are working with British Gas, Shelter and Worcester Bosch in a coalition around reducing emissions for buildings. As a leading mortgage provider it gives us an opportunity to demonstrate what we can do to help, and to see what support we need from government to send those long-term policy signals.
What are your objectives for COP?
First, to demonstrate that finance has an important role to play in the transition, and that we are willing to bring our skills, expertise and balance sheet to that transition. The second objective is to demonstrate that we’re here to support our customers. It is vital that they know that we are here to help them not only reduce their emissions, but to also help them take advantage of the opportunities that the transition to net zero brings.
We also want to showcase some of our customers who have been doing amazing work—to show what’s possible, and how a bank can lead and enable its customers to be at the forefront of this transition, and to take advantage of it as well. All in all, we’re really excited to see what we can contribute to COP.
What does it mean for your customers?
That they can understand where they are today in terms of their ambitions by looking at their existing carbon footprint and how that aligns with the overall objective towards net zero.
For our bigger customers, we’re there to help them tap into the capital markets. There’s a weight of ESG and green money sitting there, looking to be deployed into the new technologies that are going to make the transition viable. It’s an exciting time for them and it’s an exciting time for us.
You’re launching your Springboard for Sustainable Business at COP26. Why is this important?
Our research shows that 86 per cent of businesses want to do something about sustainability, but around half of them don’t know where to start. This report will give them a very clear case as to why sustainability and climate action is going to be good for their business. It will also give them examples of tools and materials that they can access that are going to help them set in place the strategies, and give them the support that they need to operationalise them, as well as look to access the finance that will enable them to grow.
How does action on the ground support the ambitions of delivering the Paris Agreement and support the increased ambition that moves us towards net zero?
The top-down trajectory that was set by Paris through the NDCs needs to be matched by the bottom-up action that takes place in every single household; every single buying decision; every single business activity that takes place on a day-to-day basis. We, through our role as a provider of finance, bringing our expertise and advice, we can help our customers do their bit and play their part in delivering the global ambition. We’re all part of a system that needs to work together, both from the top-down to set the ambition, and from the bottom-up to drive the action. That’s where we think the real dynamism can come from COP26, as we all come together to deliver the ambition of staying as a 1.5C world, ensuring that we have a sustainable planet for us all to live on.
