In conversation with James Close

Q. Why is finance such a key enabler in the drive towards net zero?

It’s estimated that US $50 trillion in incremental investments is needed to transition the global economy to reach net-zero emissions by 2050, so enabling this ambition requires a huge and rapid reallocation of capital. Crucially, this means the mobilisation of both private and public finance is going to be necessary to fund the infrastructure of future green economies.

Of course, this is not something any individual organisation can do on its own. Collective action is required from the financial industry on a global scale, and thankfully, the Glasgow Financial Alliance for Net Zero (GFANZ) – which was launched in April 2021 with NatWest Group as a founding member – currently includes more than 500 firms from across the global financial sector, and now represents more than US $130 trillion in assets under management and advice. This kind of collaborative initiative is vital to amplify the billions of government-led funding into trillions of total climate investment.

But, meeting the investment gap is just one part of the challenge. Financial firms also have a vital role to play in developing new and diverse forms of green finance expertise, guiding on requirements of decision-useful climate data and ensuring that the delivery of net zero financing is carried out in a fair, transparent and sustainable way, protecting the most impacted and vulnerable communities

Q. What are the opportunities you see in the transition to a net-zero economy?

As I look at the steps required to reach net zero by 2050, including ambitious interim targets such as ours to at least halve the climate impact of our financing activity by 2030 and align with the 2015 Paris Agreement, it’s clear how rapidly certain sectors will need to change. As well as presenting risks, I also believe the transition towards greener economies will create significant opportunities.

For instance, I believe there is considerable scope for the UK agricultural sector to become much less carbon intensive. Adopting more sustainable, nature positive farming solutions has the potential to not only produce better foods and improve biodiversity, but also to combat soaring input costs for farmers and create greater supply chain resilience for retailers and customers.

Likewise, the need for improved energy efficiency in the UK’s housing stock will enable commercial opportunities through the retrofitting of existing heating solutions and the provision of clean energy. Indeed, offshore wind, hydrogen and carbon capture and storage are likely to play a huge role in boosting many regional economies across the UK as well as benefiting customers and improving our national energy security.

Importantly though, I believe the opportunities in delivering on net zero exist across the whole business spectrum. As our ‘Springboard to Sustainable Recovery’ report highlights, SMEs can deliver a significant amount of the UK’s abatement targets, if they get the right support. And I believe this can have huge benefits, driving business value by reducing a business’s own emissions, and unlocking growth through wider climate action.

Q. What are NatWest Group’s actions to reduce climate impact?

Our ambition to tackle climate change means we’ve already reduced our direct own operations footprint by 46%, and plan to achieve a 50% reduction by 2025, against a 2019 baseline. Elsewhere, we have set stretching targets for our wider operational value chain and have an ambition to at least halve the climate impact of our financing activity by 2030. In terms of leadership accountability, climate considerations have been included in senior executive remuneration since 2020. During 2021, we added performance against climate targets as part of the bonus pool assessment for our wider workforce, recognising its central role in our strategy.

In December 2021, the NatWest Group Board approved the adoption of climate risk appetite measures into the Enterprise-wide Risk Management Framework, for integration in business-as-usual risk management in 2022. Meanwhile, our Climate Opportunities Group (COG) has been established to support our ambition to be a leading bank in the UK helping to address the climate challenge.

The COG brings together colleagues from all business segments to conceptualise and develop opportunities that complement the NatWest Group climate ambition. With climate a key focus area of our purpose, we are providing easily accessible climate awareness content for colleagues, including launching a new Climate Change Awareness module in partnership with the University of Edinburgh. So far, this has been made available to over 16,000 colleagues, helping them to understand the impacts of climate change and the positive actions they can take.

Q. What next?

Much of our climate-related activities thus far have been focused on the actions required to directly reduce emissions associated with fossil fuel use: decarbonising transport, heat and electricity generation to accelerate the transition to net zero.

But collectively I believe we also need to think more broadly about wider consumption emissions and the scarce resources associated with the production of materials.

In this sense, consideration of the circular economy may become much more relevant – what it takes to help move from our current extractive ‘take make-waste’ linear model of economic growth, to one that is based on more circular practices: reusing, repairing and repurposing.

The shift towards the circular economy will help to tackle climate change at its root cause, reducing the need to deplete natural resources and cutting the energy demand required in new production. Importantly, this is not only good for the planet, but has a clear commercial logic, with the shift to a more circular model reshaping businesses and industries towards sustainable long-term value creation.

Q. On a personal level, what drives your passion for being part of the climate solution?

I heard Al Gore speak in Sheffield in 2009, delivering an incredibly powerful message that resonated deeply with me. The effect of that evening personally was that I’ve subsequently devoted my career to being part of the climate solution, building up my knowledge advising the UK Government and the Mayor of London, before working at the World Bank.

It was in this latter role that I gained a much fuller appreciation of how climate change is impacting the poorest and the most vulnerable, who have ironically done the least to contribute to the problem. I also saw the power that finance could have to enable dramatic and large-scale positive change.

It’s why I’m now delighted to be working for NatWest Group – whose ambition is to be a leading bank in the UK helping to address the climate challenge.