Climate change

so, shamelessly, bringing Parliament into disrepute.

This tawdry episode adds to a pattern set by the government of Boris Johnson. Having strode victorious into Downing Street as one of the architects of Brexit, the prime minister behaves as if laws are for other people. Lord Frost, the government’s Brexit negotiator, is demanding that the eu rewrite aspects of the withdrawal treaty relating to Northern Ireland that Britain signed up to in a push to get Brexit done (see Charlemagne). In September 2020 Sir Jonathan Jones, the head of the government legal service, advised that the government’s plan to override parts of the Brexit withdrawal deal would break international law. Mr Johnson ignored his advice, so Sir Jonathan felt obliged to resign.

The prime minister is also seeking to undermine Britain’s precarious system of checks and balances. When officials responsible for holding ministers to account have tried to do their job, they are made to suffer. Two months after Sir Jonathan quit, an independent adviser on the ministerial code reported that Priti Patel, the home secretary, had bullied underlings. When Mr Johnson said he would ignore that report, too, the official followed Sir Jonathan out of the door.

The government is neutering independent bodies supposed to hold it to account. It wants to put the Electoral Commission, a watchdog, under the thumb of a Conservativedominated committee of mps, and to strip it of the power to initiate criminal prosecutions. It is trying to parachute in Paul Dacre, a former editor of the Daily Mail, a tubthumping Brexiteer and allround scourge of liberals, as the boss of Ofcom, the media regulator, even though the appointment panel concluded that his lack of impartiality made him “unappointable”. The mp who leads the parliamentary committee concerned with culture and the media has said publicly that, in choosing its next political editor, the bbc should pick a Brexiteer.

The government is also trying to tame the courts. It wants to tighten rules governing judicial review of public bodies’ decisions. An egregious proposal by the justice secretary, Dominic Raab, would make it easier and quicker to change court rulings that it deems to be wrong (see Britain section). Rather than defending judicial independence, the attorneygeneral, Suella Braverman, has joined the attack, implying that in some cases related to Brexit proEuropean sentiment meant judges had entered the political arena.

As we write this, the government was starting to have second thoughts about Mr Paterson. After a furious backlash and opposition threats to boycott the new committee, it pledged to seek crossparty support for changes to the system. It is not too late for Mr Johnson to learn the moral from this sleazy affair. Britain’s constitution grants the executive great latitude. Having brought Britain out of the eu against the wishes of the “liberal elite”—by which they mean everyone from judges to journalists—Brexiteers see themselves as beholden to no one. If the government continues to act as if rules are for losers, it will bring democracy itself into disrepute. n

Climate change and investing The uses and abuses of green finance

Why the net-zero pledges of financial firms won’t save the world

Alas, the cop26 summit in Glasgow is shaping up to be a disappointment. The hope that emerging markets, which belch trol the global assets that create emissions. Asset owners would have both the motive and the means to reinvent the economy. out much of the world’s greenhouse gases, would announce ambitious proposals is being dashed. The plans of China, India and Brazil all underwhelm. There is no sign this will be the cop that kills coal, as Britain, the host, wanted. World leaders have still not agreed to stop subsidising fossil fuels.

But one area where enthusiasm is growing is climate finance. Financial institutions representing nearly $9trn in assets pledged to uproot deforestation from their investment portfolios (see International section). The most striking announcement has come from the Glasgow Financial Alliance for Net Zero (gfanz), a coalition cochaired by Mark Carney, a former governor of the Bank of England. Its members, which include asset owners, asset managers, banks and insurers, hold about $130trn of assets. They will try to cut the emissions from their lending and investing to net zero by 2050. Can the financial industry really save the world?

In principle, it has a huge role to play. Shifting the economy from fossil fuels to clean sources of energy requires a vast reallocation of capital. By 2030, around $4trn of investment in clean energy will be needed each year, a tripling of current levels. Spending on fossil fuels must decline. In an ideal world the profit incentive of institutional investors would be aligned with reducing emissions, and these owners and financiers would conThe reality of green investing falls short of this ideal. The first problem is coverage. The Economist estimates that listed firms which are not statecontrolled account for only 1432% of the world’s emissions. Statecontrolled companies, such as Coal India or Saudi Aramco, the world’s biggest oil producer, are a big part of the problem and they do not operate under the sway of institutional fund managers and privatesector bankers. A second issue is measurement. There is as Financial firms with yet no way to accurately assess the carbon footnet-zero targets, global total print of a portfolio without double counting. Emissions from a barrel of oil could appear in Nov 2020 30 the carbon accounts of the firms that are drillApr 2021 160 ing, refining and burning the stuff. Methodologies behind attributing emissions to financial Nov 2021 450+ flows are even sketchier. How should shareholders, lenders and insurers divvy up the emissions from a coalfired power plant, for instance? The third problem is incentives. Private financial firms aim to maximise riskadjusted profits for their clients and owners. This is not wellaligned with cutting carbon. The easiest way to cut the carbon footprint of a diversified portfolio is to sell the part of it invested in dirty assets and put the proceeds in firms that never emitted much, such as, say, Facebook. Together, the five biggest American tech firms have a carbon intensity (emissions per unit of sales) of about 3% of the s&p500 average.