By this point, the climate science is irrefutable: the world needs to take urgent action to tackle climate change and limit warming to 1.5°C above pre-industrial levels.  But our current economy is not at all aligned to this trajectory. To achieve such a transition requires governments, corporations and communities to rise to the challenge, to consider their carbon output, and take concrete steps to reach net zero. 

Delivering our collective goals requires greater – and increasingly sophisticated – collaboration. While it is important for businesses and institutions to set their own targets (at Standard Chartered we aim to be net zero in our operations by 2025 and in our financed emissions by 2050), working together is critical if we are to ensure a comprehensive, and just, transition.  

This is why the work of the Net-Zero Banking Alliance (NZBA), as it navigates its second year, has never been more important. Bringing together more than 100 banks from 41 different countries is no mean feat, but ensuring that all members are supported to set and meet their net zero targets is tougher still. The Alliance provides an international framework and guidelines to help banks design their approach to net zero and learn from the institutions that are ahead of the curve – information that is invaluable as the task of decarbonisation becomes even more urgent. 

Pre-competitive collaboration between banks, however, is only one tool to help the banking sector meet its objectives. We are just one piece of a much larger economic and political landscape which must all pull together towards this one important goal. To help our clients reduce emissions, we need effective cross-sector strategies that will create the infrastructure to allow interconnected industries to decarbonise in tandem. For example, the shipping sector needs new on-land infrastructure to decarbonise, the aviation sector can’t lower its carbon output without exploring new types of power (such as biofuels), and greener steel production is reliant on low-carbon hydrogen. 

To achieve these kinds of large-scale changes, governments need to show leadership in creating a supportive environment and relevant policies that form the basis of national net-zero strategies.  It is vital to see bold decisions taken to create consensus, or interoperability of standards, on climate risk management and modelling, reporting, frameworks and incentives and carbon pricing and taxation. Carbon pricing in particular is an important way of bringing economic growth and fighting climate change together, closely aligning economic success and climate success. Without the right policies and incentives, we will not see much needed finance flow to projects which support the transition to net zero in the places that need it most. 

Governments cannot be expected to solely fund the transition to net zero but will need to use their funds to help encourage investment from the private sector. Sourcing the necessary financing to help the world reach net-zero will require partnerships between the public and private sector. According to Standard Chartered’s recent Just in Time report, emerging markets alone have a $94.8tn investment gap. Blended finance can encourage private sector investment by reducing the risk and provoking the “crowding in” of private capital. Each dollar of public money should be aiming to magnify its impact by bringing in $10 of private finance. 

Finance is the key that makes the whole net-zero transition happen. Given this critical role, the importance of organisations like the Alliance cannot be underestimated. A forum of the world’s biggest banks has the influence to drive the funding of net zero at a global level. But even as Alliance members make progress in target setting and we chart our to-do list for the upcoming months and years, we continue to look outward, to work more closely with governments, key sectors and individual large corporates. With so much at stake, climate change has never been more important, and we won’t reach our goals unless we embrace collaboration. 

 

Tracey McDermott

Group Head of Conduct, Financial Crime and Compliance, Standard Chartered

Steering Group Chair of the Net-Zero Banking Alliance