Bank of England’s Governor to the finance sector: 2020 decade of action “absolutely necessary”: The legal implications

Mark Carney has issued a frank warning to the finance sector that the 2020s must be a decade of action and that the finance sector must do more, and more quickly. In an interview for BBC Radio's flagship news programme "Today", guest edited by Greta Thunberg, the Bank of England's outgoing Governor made it clear that despite worthy and well-intentioned progress to date, action would need to ramp up very quickly to limit climate change within 1.5 to 2 degrees C.

From my perspective as an environmental lawyer advising business on the risks around climate change and carbon law, these are the points that I think could have far-reaching consequences:

1.  Mr. Carney said that the UK's commitment to net zero by 2050 is "the law of the land" and as such "a question for every company, every financial institution, every asset manager, pension fund or insurer [is]: what's your plan?".  This is not just a rhetorical question: there could be serious legal consequences for businesses who ignore this warning, in the form of shareholder and stakeholder action.  Indeed, this action could target directors and officers as well as corporate bodies.  In light of this clear warning  from the Bank of England that the transition will bring winners and losers, those who don't plan, and who lose out, may well need to answer the question "so what was the plan?" in the courts.
2. Mr. Carney said that he wants corporate disclosure of climate change risks to be the norm.  Increasing disclosure has been one of the primary levers for action on climate change to date and we predict it will continue apace.  You can read our legal update on climate change disclosures and the ESG agenda here.
3.  On the question of trade deals, Mr. Carney said that it was important that climate change is factored into the deals that the UK strikes, to ensure that the UK does not simply outsource its carbon emissions, damaging its own economy in the process.  This is an important intervention.  According to government papers leaked during the recent UK general election campaign, the US has said that climate change measures cannot be part of any UK-US trade deal.  This will be an important issue to watch as the trade talks proceed.
4.  Mr. Carney said that the markets have a very important part to play, but there is also an absolute need for government regulation too.  The solution to the climate crisis needs both government regulation and market innovation.  We can expect more regulation and it is important for business to participate in the shaping of the regulatory measures to ensure clear and workable legal mechanisms.

A question for every company, every financial institution, every asset manager, pension fund or insurer: what’s your plan?

https://www.bbc.co.uk/news/business-50868717?intlink_from_url=https%3a%2f%2fwww.bbc.co.uk%2fnews%2ftopics%2fcw506d1n5m1t%2fmark-carney&link_location=live-reporting-story