The upcoming COP26 brings into sharp relief that we must move from aspirations to hard action on the transition to a net-zero carbon economy. This requires agreement on practical solutions governed by principles of fairness. In the markets where we operate, primarily in Asia, Africa and the Middle East, these actions must address both the urgent need to transition to a net-zero economy and the need to support ongoing economic development. These are not exclusive objectives and our plans manage this 'just transition' to a net-zero economy.
Let’s start by addressing the reality that fossil fuels will likely be with us for years to come and that banks will lend to companies involved in carbon-emitting industries. Our focus must be on mitigating and transitioning away from carbon-intensive activities to achieve net zero.
Our approach to net zero
Indeed, Standard Chartered has just announced its plan to cut financed emissions, mobilise capital, and accelerate climate solutions to reach net zero by 2050, including an ambitious set of targets to reduce substantially our financed carbon emissions by 2030. Details are available here. We’ve also published our methodology for measuring and reporting those changes, informed by the Science Based Target initiative (SBTi) and the Net Zero Banking Alliance (NZBA) in the hope this will help others and contribute to the ongoing debate.
Our net-zero announcement and methodology explain the ‘what’ but I’d like to expand on the ‘why’ behind our actions.
It’s very easy to say, as some critics do, that fossil-fuel use should end today and forever. Green technologies and renewable energy sources are coming along very quickly, but they can’t replace fossil-fuel use overnight and to urge that as a policy prescription is not only unrealistic, it implicitly condemns hundreds of millions of people to a life of poverty without power and greatly diminished economic opportunities. This is neither just nor practical.
The real choice we face at COP26 is between clinging to hardened positions or making real progress that addresses our climate challenges while giving those with fewer resources a chance to grow and prosper. That’s the issue we’re getting at when we speak of a just transition – one that moves with urgency in the face of a worsening climate crisis but that also respects the rightful expectation of an improving quality of life for people in the emerging economies of the world.
Bridging the divide
We aim to reach net zero by 2050 even though 33 of the 59 markets in which we operate, including some of the most populous, don’t currently have a net-zero 2050 commitment and some have set longer-dated targets. Nevertheless, by the end of 2022 we expect all our clients in the power generation, mining and metals, and oil and gas sectors to have a strategy to transition their business in line with the goals of the Paris Agreement.
The keys to bridging this divide are finance and scale. Finance in the form of the promised support from rich countries to their less-developed neighbours as they transition to a net-zero future but also finance that supports sustainable infrastructure and the transition of fossil-fuel giants into renewables and green tech behemoths. Banks, governments, multilateral institutions, private investors and carbon-market participants must marshal all available resources to bring this about. This is how we show our commitment to shared climate aims, not by walking away.
The association of banks with fossil-fuel companies may be distasteful to some and we understand that. What’s less well understood is the enormous role these same companies can play in accelerating the development and adoption of green technologies, particularly in the emerging markets where they have outsized influence on employment, economic development and generation of tax revenue.
That’s why our plan extends beyond the necessary goals and emissions targets to catalysing finance and partnerships to scale impact, capital and climate solutions where they are needed most, including a plan to mobilise USD300 billion in green and transition finance by 2030. We aim to accelerate new solutions that can help support a just transition, including setting up a dedicated Transition Acceleration Team.
COP26 is crunch time. It’s time to stop finger pointing and move forward together with urgency and action to deliver a just and equitable carbon transition for all the people of the world.