06 Oct 2020

Climate action in France, the UK and China


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Between wildfires raging in Australia at the start of the year, and the news in August that Greenland’s ice sheet may have melted beyond the point of no return according to an Ohio State University study, the climate emergency shows no signs of abating.

International efforts to tackle climate change – notably the seminal Paris Agreement in 2015 committing 195 countries to decrease their carbon emissions, the ambitious EU Action Plan on Sustainable Finance, and the European Green Deal – will be key if we are to turn the tide on global warming.

But international coordination can only go so far without concerted country-level contributions. Here we look at three examples of how bottom-up climate action will also play a part to help shift the needle: France on the frontline, encouraging action in the UK, and the environmental elephant in the room – China.



France was the first country in the world to define a clear roadmap to fight climate change through carbon reporting.

Article 173-VI of the Law on Energy Transition for Green Growth, which came into effect in January 2016, covers ambitious targets for greenhouse gas (GHG) emissions reduction, energy consumption and share of fossil fuels versus renewables 1. It imposes mandatory carbon disclosures for listed companies and forces asset owners and investment managers to report their portfolios’ carbon footprint.

The law was introduced on a “comply or explain” basis, in which the regulator lays out a code, and a company can either comply, or explain publicly why they do not. As well as reporting climate-related risks, institutional investors must also report on how they integrate broader ESG metrics into their investment policies 2.

“Article 173-VI is a good example of the way we can change the rules of the game. In September 2014, private investors made the commitment before the UN to carry out better analysis and better reporting of their climate risk exposure […] to make the switch from a purely voluntary approach to the scale of action required by the climate challenge, policymakers had to transform the experiment by mainstreaming this new requirement.”

Pascal Canfin, former CEO of WWF France

​October 2016

The United Kingdom


The Bank of England is taking centre stage on climate finance in the UK, thanks in part to the early efforts of former BoE governor Mark Carney.

Carney understood that climate change is a financial stability issue and should therefore be a high priority for any central bank. In a 2018 BoE review entitled ‘Transition in thinking: The impact of climate change on the UK banking sector’ 3, he highlighted the shift in perception of climate change from one of reputational risk, to one of core financial and strategic risk.

“A question for every company, every financial institution, every asset manager, pension fund or insurer: what’s your plan? Four to five years ago, only leading institutions had begun to think about these issues and could report on them. Now $120tn worth of balance sheets of banks and asset managers are wanting this disclosure [of investments in fossil fuels]. But it’s not moving fast enough.”

Mark Carney, former BoE Governor

December 2019

Although Carney has left the BoE (and is now the UN’s Special Envoy on Climate Action and Finance), the Bank still has another vocal champion of climate action: Sarah Breeden. Breeden heads up supervision of UK banks, building societies and credit unions, and is the bank’s executive sponsor for work on improving the financial system’s resilience to climate change.

“The economy and the financial system appear to me to be like super-tankers rather than high-speed catamarans in the America’s Cup. To change course, therefore, we need early action, a sustained effort and a recognition that it is better to be roughly right now, not precisely right when it is too late.”

Sarah Breeden, Executive Director, Bank of England

April 2019

​Another interesting UK development is the proposed shake up of the £1.6 trillion pensions market. Specifically, the Pensions Climate Risk Industry Group (PCRIG) is proposing an amendment to the Pension Schemes Bill, requiring climate change risk governance and Task Force on Climate-related Financial Disclosures (TCFD) reporting for pensions trustees. This is encouraging, as the TCFD framework is seen by many as the gold standard for corporate disclosures on climate-related financial risk.



As the world largest emitter of greenhouse gases, accounting for approximately a quarter of the world total, China’s role in the transition will be critical. Currently, China’s Nationally Determined Contribution (NDC) –the specific climate targets required by the Paris Agreement to achieve its goals – is rated as “highly insufficient” (as at December 2019), meaning the country is falling behind on its Paris commitments to a low-carbon transition.

However, China’s current domestic policies point to an improving trajectory, which could lead to a mere “insufficient” rating. That’s still a long way off full 1.5°C alignment, but the desire and ambition for emissions reduction is still alive.

China is rather ironically both the biggest coal consumer in the world, and the largest clean energy producer. Coal accounted for 66% of China’s electricity output in 2019, down from a peak of 81% in 2007.4 The share of coal in the installed power generation capacity in China which is currently 58%, is planned to be reduced to 32% in 2040 under the new policies.5

So, the choices the country makes domestically and internationally with respect to the financing of brown and green energy sectors will make a noticeable difference to global decarbonisation and a 1.5°C scenario.

On 22 September 2020, China’s President Xi announced that China will aim for carbon neutrality by 2060 – a move widely interpreted as a significant move on climate change, given China’s high emissions and longstanding view of itself as an emerging economy that could not afford to divest from fossil fuels.

“The Paris Agreement on climate change charts the course for the world to transition to green and low-carbon development. It outlines the minimum steps to be taken to protect the Earth, our shared homeland, and all countries must take decisive steps to honour this Agreement. China will scale up its Intended Nationally Determined Contributions by adopting more vigorous policies and measures.”

President Xi Jinping

September 2020

(China Ministry of Foreign Affairs translation)

​Asset owners also doing their part

Even ahead of sweeping new developments in European climate benchmark regulation, we’re encouraged to see major commitments from asset owners and pension funds to decarbonise their holdings with low carbon indices and mandates. To name a few:6

  • UK: HSBC Bank UK Pension Scheme, £3.5bn
  • Denmark: PenSam, €4.8bn
  • France: FRR, €2.5bn
  • Sweden: AP4 (fourth national pension fund), $3.2bn
  • United States: CalSTRS, $2.5bn
  • New Zealand: NZ Super Fund (sovereign wealth fund), $10bn

Climate finance will play a powerful role in the fight against climate change. Together, we can make it happen.

Explore our range of Climate Transition ETFs, designed to align with the Paris Agreement’s most ambitious goal – to limit global warming to 1.5°C

1 https://www.unpri.org/climate-change/french-energy-transition-law-global-investor-briefing-on-article-173/295.article
2 https://www.frenchsif.org/isr-esg/wp-content/uploads/Understanding_article173-French_SIF_Handbook.pdf
3 https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/report/transition-in-thinking-the-impact-of-climate-change-on-the-uk-banking-sector.pdf
4 https://energypost.eu/will-china-build-more-coal-to-stimulate-the-economy/
5 International Energy Agency
6 Sources: IPE.com, MSCI.com, calstrs.com,irmagazine.com, pionline.com

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