John Glen told that rules ‘make a mockery’ of new ‘gold standard’ for investments
But, asked if firms could be given “the new green gold standard” and still invest in new coal production, he replied: “Yes, that will be possible.”
The admission will fuel criticism that the impact of the Glasgow Financial Alliance for Net Zero (GFANZ), covering assets worth £95 trillion, has been exaggerated.
Banks made similar pledges at the 2015 Paris climate summit that were watered down – allowing huge investment in fossil fuels as the world bounces back from the Covid pandemic.
One US bank, BNY Mellon, was in talks to sign up to a net zero industry initiative, yet its subsidiary was preparing to invest in a coal mine in Australia, The Financial Times reported.
On BBC Radio 4’s Today programme, it was suggested to Mr Glen that such a situation “makes a mockery” of the standard being unveiled in Glasgow.
But the Treasury minister said: “What we can’t do is just press a button and, on day one, there will be a transition.
“In the UK, we have a responsibility to take a lead in this – obviously we can’t account for every company that’s listed in other jurisdictions.”
Economists estimate that about $100tn of investment is needed in the next three decades to meet the net zero goal, meaning GFANZ will – in theory – provide enough cash to achieve the goal.
It will see all listed companies in Britain forced to produce their own binding plans to reduce carbon emissions or face fines, Mr Sunak announced ahead of an event at Cop26.
A task force under the control of the Financial Services Authority will set standards, to ensure proper checks that firms are enforcing the pledges they have made.
In Glasgow, Mr Sunak said 40 per cent of global assets will be aligned to the 1.5C limit for global warming, adding: “Six years ago Paris set the ambition. Today in Glasgow we’re providing the investment we need to deliver that ambition.”
But Lucie Pinson, executive director of the Reclaim Finance, said: “Not a single rule to prevent even one dollar from being invested in the expansion of the fossil fuel sector.
“Once again, the financial sector is willing to puff itself up with hot air commitments instead of enacting the concrete cuts in oil, gas and coal financing we really need.”
Sam Alvis, of the Green Alliance thinktank, welcomed “definite progress”, but warned: “Trillions of dollars are still flowing to fossil fuels every day.
“Governments will need to regulate companies, not just publish transition plans but have strict criteria with legal bite on their credibility and pace.”