COP26

Billionaire Hohn urges central bankers to turn up climate heat on lenders

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People gather around "Little Amal", a 3.5 metre tall puppet of a young Syrian refugee girl, during the UN Climate Change Conference (COP26) in Glasgow, Scotland, Britain, November 9, 2021. REUTERS/Phil Noble/File Photo

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  • Chris Hohn says 2050 targets 'don't mean a damn thing'
  • Says failure to apply short-term targets is 'greenwashing'
  • Central banks are letting systemic risk build, Hohn says

GLASGOW, Nov 9 (Reuters) - Central bankers must force the world's banks to set short-term targets to cut carbon emissions from their loan books or the sector's net-zero pledges will simply be "greenwashing", billionaire hedge fund investor Chris Hohn told Reuters.

Speaking on the sidelines of the COP26 climate talks in Scotland, Hohn - a major financial backer of climate-focused non-governmental organisations - told Reuters annual emissions cuts of 7% were needed to ensure global targets were hit.

U.N. climate envoy Mark Carney said last week that firms in the Glasgow Financial Alliance for Net Zero (GFANZ) network he chairs now had $130 trillion in assets under a commitment to reach net-zero carbon emissions by mid-century.

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But the finance sector's efforts to date have been patchy, and nowhere near reaching the $100 trillion or so needed to help the transition to a low-carbon economy and cap global warming.

"We've got to get it into people's heads that 2050 targets don't mean a damn thing," Hohn said. "I'm not fooled by them, I don't think the general public is fooled by them.

"There's no short-term reductions required to be a member (of GFANZ); 'short-term' meaning five years ... But if they don't (provide them), then it's greenwashing and a waste of time. That's the acid test."

Hohn, one of Europe’s best known activist investors, has made climate change central to his engagement with companies and wants shareholders to have a regular vote on climate strategy.

While Britain, the European Union and others have put national net-zero pledges into law, central banks have yet to require concrete action from lenders.

"If the central banks don't translate that law into requirements that the banking system reduces the carbon emissions of their loan book, then the law obviously won't be complied with," the 55-year-old Briton said.

"And what's going on is the central banks don't want to force a decarbonisation target on the banks. They don't want to apply any pressure. They don't want to increase the capital ratios for dirty industries."

The Bank of England and others are planning to conduct climate-related stress testing of banks, but Hohn said these would "do nothing".

British finance minister Rishi Sunak last week said he would force all UK companies to disclose climate-related risk information - a process that was previously voluntary.

But he said there would be no binding targets on banks or bans on investments in carbon-intensive industries. read more

As yet, banks do not generally demand data on emissions and climate action plans from their corporate clients.

Hohn said BoE governor Andrew Bailey should be pushing the banks to do so.

"How is he going to get the banking system to do their part to get the UK compliant with the Paris Agreement? What targets does he expect the banks to put out?"

Hohn said that central banks "don't too seem to think it's their job at all - and it's absolutely ridiculous".

The Bank of England has said its job is to ensure banks hold enough capital to deal with fallout from climate change, not to determine the pace and pathway of transition to a net-zero economy, a role that government should fill.

Sunak said last week he would set out proposals next year on how the financial sector should transition to net zero by 2050.

"Systemic risk is building in the banking system because the central banks aren't doing their job. ECB isn't acting, the Bank of England isn't acting, the Federal Reserve isn't acting," Hohn said. "But they need to act - and governments need to put pressure on them to do their job."

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Additional reporting by Huw Jones; Editing by Kevin Liffey

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