Mark Carney, the unlikely climate champion

Former Goldman Sachs banker is calmly, steadily steering the financial sector in a greener direction

(Pic: Bank of England/Flickr)

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Few world leaders have done more to warn of the potential impacts and opportunities of climate change than Mark Carney.

In the past 15 months the governor of the Bank of England has delivered four keynote speeches focused on global warming and participated in a UN climate summit.

Carney doesn’t do soaring rhetoric: what he does do is grind out a series of carefully calibrated warnings on the impact a warming world could have on the financial markets.

“Once climate change becomes a defining issue for financial stability, it may already be too late,” he told the UK insurance industry at a September 2015 event at Lloyds of London.

“Climate change is a tragedy of the horizon which imposes a cost on future generations that the current one has no direct incentive to fix,” he warned German business leaders a year later.

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As chairman of the G20 nations’ Financial Stability Board, Carney has overseen studies into the potential of green finance flows and the need for greater transparency on climate risk.

The latter was presented in London this week in a smart but low-key launch at the Tate Modern, attended by media and representatives from banking and industry leaders.

Mandated by the G20 and chaired by former New York mayor Mike Bloomberg, the thick report may prove to be a turning point in the way the financial services sector thinks about climate change.

It sets out recommendations supported by Barclays, HSBC, Tata Steel and the China Development Bank for tougher climate risk analysis across all sectors – including fossil fuel majors.

It details how companies should map out how they will fare if the 195 countries that agreed the Paris climate deal deliver on their plan to cut carbon emissions to virtually zero by 2050.

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“This is a solution for the market, by the market,” said Carney. “With the right information, financial markets can smooth the transition to a 2C world,” he added.

There’s nothing on polar bears, penguins, wind turbines or the need to go vegan in Carney’s playbook. He’s so dull he can be hard to quote, but his words make sense to the banking community.

“There have been lots of attempts to give companies guidance, but none of those have come from the Financial Stability Board or the governor of the Bank of England,” says Steve Waygood, head of Aviva Investors sustainable and responsible investment team.

“He’s a climate hero for bringing in a vital constituency,” says Mark Campanale, a former banker now running the Carbon Tracker Initiative (CTI). “He says straightforward things: markets have to price risk and we need more data and scenario analysis.”

Carney’s impact on media coverage of climate is instructive. Where green groups target the Guardian, New York Times and other centre-left outfits, when the governor talks climate he’s reported across the mainstream media.

That makes him a target for critics, notably those who want him to stick to his “day job” as governor.

“Who put Mark Carney in charge of climate policy?” asked the Daily Telegraph’s business columnist Jeremy Warner in 2015, branding his interest in the issue “well meaning” but “reckless”.

Former chancellor Lord Lawson – founder of the climate sceptic Global Warming Policy Foundation – has long called on Carney to face the sack, accusing him of “engaging in green claptrap”.

Times writer Tim Montgomerie was equally dismissive this week – tweeting the governor was “not running” to be the next prime minister of Canada yet.

What’s curious about these mini-blowouts is that Carney actually says relatively little on climate policy – simply that countries and companies should be aware of the risks they face.

“Participants in the Lloyd’s market know all too well that what appear to be low probability risks can evolve into large and unforeseen costs over a longer timescale,” he said in last September’s address.

Carney did touch on the stranded assets debate – the chance that some oil, gas and coal reserves could become worthless if the global transition to a greener economy accelerates.

But here again he is not saying anything new – just taking seriously the 2014 Intergovernmental Panel on Climate Change (IPCC) calculations on what remains in the carbon budget for 2C.

“If that estimate is even approximately correct it would render the vast majority of reserves ‘stranded’ – oil, gas and coal that will be literally unburnable without expensive carbon capture technology, which itself alters fossil fuel economics,” he said.

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Critics of his interventions are “dangerously misguided” argues Waygood, who says Aviva and the wider insurance industry “strongly support” his stance.

“We’re at one end of a spectrum of risk. Warming beyond 4C (above pre industrial levels) is an existential risk for the insurance sector.”

Jane Ambachtsheer, global head of Responsible Investment at Mercer Investments, says Carney’s warnings are pushing at an open door.

“There have been clear signals from the investment community in the last decade that companies are interested in assessing climate risk,” she says. “The fact over 6,000 already report [on climate risk] voluntarily through CDP suggests that message is getting through.”

Where Carney’s desire to drum up climate warnings come from is not clear – one report says his wife Diana is an “eco warrior” who wants to return consumption to “sustainable” levels.

We also know he met UN climate chief Christiana Figueres for a business breakfast in October 2015, and that he received a presentation on Carbon Tracker Initiative’s “unburnable carbon” report earlier that year.

But reading through his speeches, what comes across is less a passionate treehugger and more a man who has looked at the data and thinks investors could do with a little more clarity.

It’s a message he will doubtless take to the World Economic Forum in Davos next month, where he’s due to host a climate round-table.

“Given the uncertainties around climate, not everyone will agree on the timing or the scale of adjustments required to achieve this goal,” he said at yesterday’s report launch.

“But the right information will allow optimists and pessimists, sceptics and evangelists, to back their convictions with their capital.“

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