Episode Transcript
Jane Goodland: Heather welcome. And thank you for joining us on NetZero Conversations.
Heather Buchanan: Absolute pleasure. Thank you.
Jane Goodland: You are executive director at the All Party Parliamentary Group on Fair Business Banking.
Heather Buchanan: Yes.
Jane Goodland: That's quite difficult to say, can you tell us a bit about that group please?
Heather Buchanan: So it's a group of about 140 MPs and peers within Westminster who have an interest in the relationship between businesses and financial services sector, and making sure that the financial services sector does the best for businesses in the UK.
Jane Goodland: And you also were involved in setting up the NetZero Alliance for the banking sector. Is that right?
Heather Buchanan: Yes. So we co-founded a project called Bankers for NetZero. It was originally just supposed to be a one off project that lasted for a year until COP 26, which turned into two years, of course, because of COVID. And was born out of the idea that we could see that there was going to be a really intense change that the whole industry was going to be going through. And fundamentally that was going to change relationships because ultimately banks were in the process of redefining risk and redefining value, which, of course, are fairly central to the financial services sector. So we just wanted to make sure that we started the conversations early with businesses, with banks, and with politicians as well, and policy makers to make sure that we have as much of a glide path as possible rather than cliff edges because if the wrong incentives were put in the wrong place, it could become very difficult. So that was really the orange of that initiative. And since then, it's grown arms and legs.
And we're now the UK country chapter of the NetZero Banking Alliance. So we're the first country chapter in the world and it is very much about taking the commitments that have been made in a high level, and then translating those into what that looks like on the ground, given our particular legislative regulatory, cultural framework that we have within the country.
Jane Goodland: So what types of things will banks be doing to be able to activate those commitments that they've made? What does that mean in practice?
Heather Buchanan: Well, that it's really tricky actually in practice because not to put to [inaudible 00:02:21] but a lot of these commitments cannot be kept without significant policy intervention. So a perfect example, because banks have signed up to decarbonize their scope three emissions and go through the entire loan book, they're essentially responsible for the carbon emissions of every household that has a mortgage and every and every small business. So to get the retrofitting, that level of decarbonization, and that level of behavioral change, that's often stuff that really needs to happen from government. And industry can support that. So there's a lot of tricky discussions on how do we engage with the retrofit agenda? How do we engage with supporting SMEs? Those are the two areas we've done deep dives into so far.
The plan is to go into another sector, probably agriculture next and then take those. And essentially, to a certain extent, we're also trying to de-risk some of the bold policy decisions that parliamentarians need to make in order to move the agenda forward. So it is very much about having the tough conversations because you've got a lot of competing interests in the room, but we were very keen that this initiative involved the very broad [inaudible 00:03:33]. So we've got WWF and E3G involved. And Nigel Topping was on our original steering committee before we've turned it into this long term project now. So we've had a lot of tough conversations, but I that's the whole point, is engaging, not just with the sustainability teams within the banks, but starting to do workshops where you actually engage with the people that are dealing with clients and that are front facing. So trying to make it more real, I guess, for the industry.
Jane Goodland: And I think it... I mean, it's fascinating, this part of the conversation because actually what we're talking about here is often very small businesses who may want to take steps to reduce their carbon footprint, but simply don't have the access to finance or the knowhow to make those changes, so the role of government and policy is really important. Is that something that the Alliance, have you got an active work stream or policy engagement? What are the sorts of conversations you are having with policy makers?
Heather Buchanan: Loads. I mean, we work really closely with Bays and Treasury in particular, so Bays on the retrofit team. So we meet with them quite regularly to talk about ideas that they may have. We're certainly looking to do something for the SMEs in the country, which will involve basically Bays and all the major business representatives at the CBI, and the IOD, and Institute of Directors and whatnot, and the financial services sector, and seeing how we can use the banking system as a conduit for this information to get out there as well.
Jane Goodland: And you mentioned also earlier about mortgages.
Heather Buchanan: Yeah.
Jane Goodland: Can you expand on that a little bit more? Because that's another interesting area where we can all try to decarbonize our homes more and more if we knew how.
Heather Buchanan: Well, absolutely. And I think this is probably one of the biggest challenges we have is particularly around the retrofit agenda. And because you're talking about people's homes, it's quite personal. And best will in the world, if you take a few points off of mortgage and somebody saves 50 quid a month, they're not really going to... That's not going to inspire the behavioral change that we need in order to really properly retrofit our homes and whatnot. So our proposals have been that we need to go really heavy on some mass social housing retrofit projects in order to start bringing the cost curve down because, essentially, it's boutique right now, retrofitting. So it's like going to a nice little boutique shop on the high street suite, where really it needs to be Ikea standard or B&Q, where it's just what's done, and we're just not there yet.
And really, a lot of that is going to rely on the policy makers leading that. But because of the commitments that banks have made, all of a sudden, you've got financial institutions much more interested in this, in the fabric of the buildings that they're actually lending on. And there's loads of risks that come with this as well. So if we don't do it well, you can end up in a situation where we get unmortgageable properties, all that. So it you've got really navigate your way through carefully. Otherwise, the unintended consequences can be quite severe.
Jane Goodland: Now, of course, you are focused work on the UK, but are you seeing similar type of activity in banking sectors in other countries as well?
Heather Buchanan: I know that there are, there are some alliances, but certainly, I think the ambition is that other country chapters do evolve out of this. And we've quite purposely got a lot of international organizations that sit on our advisory board, but that's certainly... I know that the UN are quite keen for other countries to evolve as well and do something similar.
Jane Goodland: And one final question if you don't mind, Heather, as we look forward to COP 27, in your opinion, what do you think is the one thing that, really, we need to get right so that the summit is a success?
Heather Buchanan: I think that we're going the right direction in terms of the focus is now on implementation rather than the commitments. And we need to start speaking the same language, I guess, first and foremost. I always like to say right now, the way that we measure sustainability in ESG, it would be the equivalent of the big four starting to compete with each other on how they present a balance sheet, or a profit and loss. It's a ludicrous idea, isn't it? And we're still in that mode. And so I think that's the implementation. The consistency is probably the things that we need to really focus on now.
Jane Goodland: So presumably, you are a fan of the introduction of globally consistent disclosure [inaudible 00:08:18] standards.
Heather Buchanan: Yes, definitely.
Jane Goodland: And looking forward to the ISSB standards coming in.
Heather Buchanan: Yes, absolutely.
Jane Goodland: Great. All right. Well, many thanks, and lovely to talk to you.
Heather Buchanan: Pleasure. Thank you.
