Mind the gender gap on corporate climate action

Hello from London. Rishi Sunak kicked Alok Sharma out of the UK cabinet yesterday with less than two weeks to go until COP27, appearing to use his first day as prime minister to punish the COP26 president for backing Boris Johnson’s abortive comeback bid.

Sharma will still lead negotiations on behalf of the UK government in Sharm-el-Sheikh but is no longer a government minister — which raises questions about how big a role climate considerations will play in Sunak’s government.

As chancellor, Sunak committed the UK to the somewhat inscrutable goal of becoming the world’s first “net zero aligned financial centre”. But during this summer’s bitter leadership contest, he also promised to repeal all laws inherited from the EU, which includes a whole raft of environmental protections, and backed Liz Truss’s controversial pledge to repeal a moratorium on fracking for shale gas in the UK.

So climate geeks may be feeling less relieved after Truss’s departure than the average Brit. Regulators may step in to fill those gaps: on Monday the Financial Conduct Authority announced a package of measures to tackle greenwashing by investment managers.

Today, Patrick looks at evidence that female board members are far more willing to take expensive action on climate change than their male counterparts. And I ask why blended finance — a much vaunted mix of targeted public and private capital — has dropped off so sharply.

And don’t forget to tune in to the Moral Money Summit Americas today and tomorrow in New York, to hear from Mark Carney, John Kerry, Desiree Fixler and many more. As a premium subscriber, you can join with a complimentary virtual pass when you register with the promo code: Premium2022. (Kenza Bryan)

Big gap in how men and women directors think about climate change, says PwC

As Kenza wrote last week, diversity in corporate boardrooms is woefully lacking. But as Europe and some states in the US write rules to require more women on boards, new data suggest men and women can have very different opinions about climate change and its relationship with profits.

Accounting firm PwC recently published an annual survey of board members. More than 700 directors responded, representing companies in a dozen industries that typically had more than $1bn in annual revenues.

This year’s survey uncovered a stark revelation: female board members prioritise action on climate change far more than men.

Two-thirds of female board directors said reducing the impact of climate change was a priority “even if it impacts short-term performance”. Only 45 per cent of men said the same.

To become a board member, men and women have to climb the same corporate ladder. They usually have similar educations and incomes (and indeed are married to each other in some cases).

So why is there a 20 percentage point difference concerning how male and female directors perceive climate change? That question cannot easily be answered yet, Maria Castañón Moats, head of the corporate governance insights centre at PwC, told me. Causation here does not lead to correlation, she said. And companies with more women on the board might already be thinking more about climate concerns, she said.

“At the end of the day, boards with female directors are likely to spend more time debating climate issues,” Moats said.

The survey results might debunk the idea that mandating women on boards is simply a box-ticking exercise. Sceptics of board quotas say more women in the boardroom will not guarantee more diversity of thought. But if there is an underlying difference between how men and women think, then that suggests the appointment of more female directors could bring a more proactive approach on climate issues.

But the survey also showed signs that directors’ enthusiasm for sustainability issues is cooling. Only 57 per cent of directors said ESG issues were important to company strategy, down from 64 per cent last year. And only 45 per cent of directors think that ESG issues boost performance, down 9 percentage points from last year.

Barely one in 10 board directors said environmental or sustainability expertise was important for their board.

But if more women become directors in the years ahead, the survey suggests boards will be taking climate concerns more seriously. (Patrick Temple-West)

Climate finance partnerships fall by more than half

“We’ve left this issue [until] very, very late, and it’s a very narrow path to get to where the world needs to be”, former Bank of England governor Mark Carney told the UK’s Environmental Audit Committee earlier this week, referring to the goal of limiting global warming to 1.5 degrees. “Events of this year have made it rockier and more treacherous, and as you know the carbon budget is brutal,” he later added.

Carney was answering questions from members of parliament on Monday about how the Glasgow Finance Alliance for Net Zero, a corporate climate initiative that claims to include 40 per cent of global assets under management, can move the dial on decarbonisation. He defended the group’s record on encouraging banks and others to devise transition plans, but admitted that some of its members were “lagging” and continuing to invest in new coal, oil and gas projects without a clear energy security justification.

Carney launched Gfanz in April 2021 with the goal of marshalling private capital towards national net zero goals. One way to do this is by combining private and public funds to achieve the heightened impact of so-called blended finance. For example, a development bank might extend the riskiest “first-loss” tier of financing for a project, encouraging private-sector lenders and investors to provide the rest.

But this sort of funding is under serious pressure according to Convergence, a membership network and grant-making body for public, private and philanthropic investors. It found that blended finance deals related to the climate amounted to $14bn between 2019 and 2021 — a sharp drop from $36.5bn in the previous three-year period.

That contrasts with the trend in overall international development assistance, which reached a record figure last year of $178.9bn, according to the OECD (although the accounting behind this figure has come under fire).

In the past three years, blended finance deals focused on climate-related issues (including decarbonisation, water systems and air pollution) have been of lower value and increasingly focused on adaptation rather than mitigation. These projects were also more likely to be backed by private equity and venture capitalists than commercial banks, according to Convergence.

The drop-off in climate-related blended finance could be down to lack of co-ordination among private actors, inefficiency in the public sector, low data availability or a lack of regulatory co-ordination, including on rule books for green investments, according to Joan Larrea, chief executive of Convergence.

Larrea said the results of the survey were “disappointing and unexpected” when assessed in the context of pledges made by the climate finance movement. “The point of blended finance is to solve very large problems . . . climate change is the ultimate universal problem,” she added. (Kenza Bryan)

Smart read

The Guardian’s Helena Horton has written a smart dive into what Rishi Sunak’s arrival as prime minister means for UK green policy. While he talked a good game on climate-friendly finance during the COP26 summit, Horton writes, “Sunak has certainly never been a passionate environmentalist”.