‘If someone is stupid enough to finance an asset that gets stranded, that’s their own stupid fault’

That work could hardly be more timely with COP28 beginning this week. A man used to big challenges, Turner wants some big solutions.

“You’ve absolutely got to have a commitment to a significant phase down of fossil fuel use,” he tells Financial News. “Anyone who says they are committed to 1.5 [degrees warming] without phasing down is either deluding themselves or trying to delude us. It would be better for a more honest debate to say: ‘We don’t care about global warming.’”

READ The City can be the world’s centre for net zero

Turner has big ambitions to save the planet. But he is also a realist. He prefers “phase down” to “phase out” when talking about fossil fuels because “we will probably always use a little bit of coal or oil or gas in the long-term.”

But who should have the responsibility for pushing that shift away from dirty fuels? Investor groups such as the Glasgow Financial Alliance for Net Zero have tried to bring some of the world’s largest banks and asset managers together to mobilise $130tn in green finance. Meanwhile, regulators have upped their scrutiny of greenwashing. Governments have pushed to mobilise the move to electric vehicles, for example, but the likes of the UK have pushed back some of the major milestones in hitting their net-zero ambitions.

Turner is clear about what he wants City firms to do: stop financing any new oil fields or expansion of existing ones, and stop exploration entirely, too. But he thinks the best hope lies with firm government policy in the real economy — anyone who thinks financial institutions making voluntary changes will be enough to avert a climate disaster is “deluded”.

“We are not going to get there if governments don’t have the guts to introduce hard policy constraints. If you had that, you wouldn’t need to get too worked up about what financial institutions finance or not,” he says. “If someone is stupid enough to finance an asset that gets stranded, that’s their own stupid fault. Caveat emptor.”

Where regulators come in for Turner is making sure everyone is on the same page. The EU introduced its Sustainable Finance Disclosure Regulation in 2021. The Financial Conduct Authority has twice delayed introducing its equivalent regulation this year, but is still planning to do so. Some ESG experts are scratching their heads about how the pair will work together.

“The main role of the regulators is transparency,” Turner says. “We just need very clear standards. I worry that some of the taxonomies are so complicated you can get lost in the detail. We need to try to reduce it to some clear plans.”

Whatever happens, City firms, politicians and regulators are all going to have to pull in the same direction to avoid significant conflicts. As Turner says, “you can’t have a government that was financing development in the North Sea, but then the FCA telling UK regulated banks they are not allowed to finance it.”

READ Schroders’ sustainability boss: ‘Tougher and more disruptive action needed’ at COP28

Financial institutions also continue to feel the pressure to improve their climate credentials from shareholders. Turner says this is a strategy that may continue bearing fruit in the future. But he is again wary of things being taken to the extreme — for example, companies that feel pressured over every issue because activists are threatening to vote down every single proposition.

“If you say, ‘I will never vote for you,’ [I] don’t have an incentive to change,” he says. “If you know you will be told you are a terrible person, then you may as well continue being a terrible person.”

However, shareholder activism can seep into the minds of executives who feel the heat from their investors as well as force companies to change in the longer term.

“They are not a CEO one day and a father of some children the next,” Turner says. “Executive teams that commit to being on the path to net zero are doing it partly because they want to look their friends and children in the face. If you say you are greenwashing then that has an influence; they were personally committed to it. Influence works in those complex bundles of emotions.”

ESG is fast becoming a key pillar in attracting the next generation of leaders to firms. Turner says City executives have told him “talented young people want to work for companies on the right side”.

Turner’s commitment to climate finance is unquestionable. A former Merrill Lynch vice-chair, he quickly found work with the UK Committee on Climate Change as its first chair. But do events such as COP28 and the climate fight risk overshadowing the social and governance parts of ESG?

For him, things are the other way round — lumping S and G in with E risks being unable “to see the wood for the trees” on the bigger issues of climate. He suggests splitting climate, social and governance issues into separate company reports.

“If it covers too many things, companies can avoid some of the big quantitative commitments because they wrap it around doing nice community engagement or they are good on diversity. They can use it as an element of greenwashing,” he says.

“[If you have S or G problems] We can fix them in five years, 10 years. But climate, if you don’t fix this fast enough, you just can’t.”

CV

Born

5 Oct 1955

Education

1978
Master’s in History and Economics, University of Cambridge

Career

2016-present
Chair, Energy Transitions Commission

2017-present
Chair, Chubb Europe

2018-present
Board member, Envision AESC

2008-13
Chair, Financial Services Authority

2008-12
Chair, UK Committee on Climate Change

2003-6
Chair, UK Pensions Commission

2002-6
Chair, UK Low Pay Commission

2000-6
Vice-chair, Merrill Lynch Europe

1995-1999
Director-general, CBI

1982-95
Various roles including director, McKinsey & Co

To contact the author of this story with feedback or news, email Justin Cash