Reflections on London Climate Action Week

London Climate Action Week (LCAW) is now a key milestone in the UK sustainability calendar. The annual week-long event focuses on harnessing the power of London for global climate action. The City of London Corporation both hosts and participates in several key moments across the course of the week.  

Here are reflections on four topics which dominated conversations across London Climate Action Week from the City of London sustainable finance team.  

Progress on ESG transparency   

LCAW started with a bang with the long-awaited launch of the International Sustainability Standards Board (ISSB) finalised disclosure standards.

A lack of clarity and comparability in sustainability reporting has been an enduring problem, meaning the publication of these standards was hailed as a crucial and historic moment. The standards, for the first time, enable businesses to have a common language to communicate to investors on their sustainability credentials as well as a set of concepts and definitions to connect sustainability disclosures with financial statements.

Until now, the absence of this in many markets had proven a barrier that has impeded the effective flow of capital. The UK has for a long time been a supporter of the standards, with the ISSB having been launched at COP26 in Glasgow. The UK Government will now put in place an endorsement mechanism for use of these standards through its Sustainability Disclosure Requirements (SDR).

Greenhushing occurs where fear of being accused of greenwashing leads firms to avoid communicating extensively about their sustainability commitments and credentials.

The development of strong sustainability standards and transparency mechanisms will help to address another theme which emerged strongly over the course of LCAW. Nervousness around accusations of greenwashing is in some cases leading organisations towards greenhushing. Greenhushing occurs where fear of being accused of greenwashing leads firms to avoid communicating extensively about their sustainability commitments and credentials. Instead, they choose to work relatively quietly towards ESG targets and commitments, as a route to avoid scrutiny. Many industry voices over the course of LCAW recognised how clearer standards – including those developed by the ISSB – will help provide some much-needed clarity for organisations, supporting them to be transparent on their ESG journeys.  

In addition to the work of the ISSB, several stakeholders at LCAW highlighted that the regulation of ESG ratings and data providers would be beneficial to supporting transparency in the market. Regulation would enhance transparency on the methodologies and reliability of ratings and data, thus reducing the risk of unintentional greenwashing.

HM Treasury is currently consulting on bringing ESG ratings providers into the regulatory perimeter. In the meantime, the FCA has tasked the International Regulatory Strategy Group, which is co-sponsored by the City of London Corporation and TheCityUK, and the International Capital Market Association to develop an industry-led voluntary Code of Conduct for ESG ratings and data providers. On Wednesday July 5, in the immediate wake of LCAW, the Draft Voluntary Code of Conduct for ESG Ratings and Data Product Providers was released for consultation. 

The growing momentum of nature on the sustainability agenda 

At the start of this year, the City of London Corporation noted that nature has often been overshadowed by climate in terms of public and policy attention. At the same time, we predicted that nature and biodiversity would receive a much greater focus in 2023. In the first half of 2023, it is clear that this has been playing out strongly. Most financial and professional services companies now recognise the need to enhance their awareness and capabilities in this critical area. 

LCAW highlighted progress on the work of the Taskforce on Nature-related Financial Disclosures (TNFD). The TNFD is due to release its final framework for use by organisations to disclose their nature-related risks and opportunities in September 2023.

Likewise, the wider prominence of nature on the LCAW agenda was evident, building on momentum gathered from the announcement of the UK – France Global Roadmap which was released in June to support companies to contribute to nature recovery. This was mirrored by an increasing recognition on several panel discussions, not just those dedicated to nature, of the role of nature in both mitigating against and adapting to the worst effects of the climate crisis, and the potential opportunity for the UK to become a leading global hub for nature finance. 

The road to COP28 

Discussions throughout LCAW emphasised that pivoting attention from commitment to implementation is especially critical in light of the first Global Stocktake due at COP28 in Dubai. At the City of London Corporation’s annual Net Zero Delivery Summit in May, which marks the midpoint between COPs, the focus was squarely on delivery. This included showcasing replicable examples of best practice as to what is working when it comes to financing the transition to a net zero economy.  

This stock take will be a crucial moment for the world to understand our progress towards the goals of the Paris Agreement. Experts expect that we will be behind where we need to be: a wake up call that we must act with unprecedented ambition to respond to the shortfall. This was reflected by Alison Campbell, the UK’s Chief Climate Negotiator, who emphasised the need for radical collaboration and the framing of net zero as an opportunity. One such opportunity highlighted as key by the COP28 High Level Champion, Razan Al Mubarak, is the funding of innovative solutions, something private sector speakers were cognisant of across many panels 

UK opportunity on climate leadership  

With LCAW focused on harnessing the power of London when it comes to addressing the climate crisis, unsurprisingly the leadership role of the UK and the opportunities presented by the net zero transition were a common thread running through many discussions.  

In June 2019, the UK became the first major economy to legislate a net zero emissions target by 2050. Reflecting on the timing of this anniversary, LCAW speakers from both Government and industry noted the significant progress which has been made in the UK since then.

This was reflected within the UK financial services sector in our recent report From commitment to action; tracking UK financial services’ progress on the pathway to net zero where research showed that the UK – alongside the US – hosted the highest number of GFANZ members with the most advanced responses in setting climate targets and implementing climate actions. 

More broadly, Chris Skidmore MP reinforced the findings of his Mission Zero Review which noted net zero as a “historic economic opportunity,” whilst stakeholders from across the sustainability spectrum referenced the skills, services and commitment of the UK when it comes to sustainable finance.  

But at the same time, challenges to the UK’s leadership remain. Against the backdrop of LCAW, the Climate Change Committee’s 2023 Progress Report to Parliament provided a sombre tone on the pace of net zero delivery. In a global context, the US’s behemoth Inflation Reduction Act, which offers billions in the form of new spending and tax breaks to support emissions reductions in the US, was frequently cited as a challenge to UK leadership.  

Overall, discussion throughout LCAW reflected that the UK will need to continue to innovate in its response to the climate crisis if it is to retain its leadership. At the same time, it was clear that across industries UK firms are ready to keep pioneering to support the shift from commitment to action.