Terra Carta: Big Banks Form FSTF

Terra Carta, the Prince of Wales issues a charter on January 11 urging businesses to support an environmentally sustainable future. In this sense, the giants of the banking sector have joined forces with Prince Charles. They are now forming a working group on net zero financing: the Financial Services Task Force (FSTF).

Focus on the Terra Carta charter, ambitious, resolute, but possibly ineffective without a clear position.

Terra Carta: an economic and political greening agreement

Investing £7.3 billion in energy and green transition

The Terra Carta Charter, a 17-page climate recovery plan, was published on January 11. It asserts that the “fundamental rights and values of nature” must be placed at the heart of the global economy.

That’s why it plans to invest £7.3 billion in the transition to clean energy. There are 100 actions that the company can take. With the goal of supporting the protection and restoration of a minimum of 30% of biodiversity, on land and underwater, by 2030 and 50% by 2050

The Terra Carta calls on large companies to sign on, in the hope that they will update and green their policies and actions. So far, several major brands such as AstraZeneca, HSBC, Heathrow Airport and BP have signed on.

By signing the charter, companies formally recognize that 2050 is the absolute threshold for setting net zero targets. And where possible, they are committed to going further and faster than the original arrangements.

10 billion USD in “natural capital” by 2022

The Terra Carta therefore aims to provide a roadmap to an equitable and sustainable future. To this end, the Prince of Wales wishes to combine the power of nature with the innovation and resources of the private sector.

One of the initiatives arising from the charter is therefore a private sector alliance. Indeed, Terra Carta is launched alongside a fund managed by the Natural Capital Investment Alliance. It aims to mobilize $10 billion in “natural capital” by 2022.

A charter whose substantiality has yet to be demonstrated

The effectiveness of the treaty is being questioned

Terra Carta is a promising agreement and aims to go beyond all existing agreements related to global warming. These include theParis ClimateAgreement, the Sustainable Development Goals (SDGs), the Convention on Biological Diversity, the Convention to Combat Desertification and the United Nations Convention on the Law of the Sea.

But its concrete effectiveness remains to be proven. For many, the agreement could not bring about any radical change. Unlike documents such as the Bill of Rights, Terra Carta has no real legal status.

The United Nations says the world will warm by at least 3°C this century. A figure well above the 1.5°C target set out in the Paris Agreement. This is true even if countries meet their current emissions commitments under the treaty.

Although it is an official treaty, the Terra Carta does not create any legal obligation to fight global warming. In this regard, this position paper would be more of a request than an obligation for change.

Making companies accountable for their voluntary commitments

However, binding provisions, such as the stakeholder engagement report, could still allow for some evolution. Indeed, countries and companies must regularly report on their progress against the submitted emissions targets. The Terra Carta framework will therefore hold companies accountable for their voluntary commitments.

Rudyk, director of the climate program at New York University School of Law, talks about the incentive power of Terra Carta. According to him, this disclosure has proven to be the key to the success of international agreements:

“In a way, that’s the point of Terra Carta – to report on [les engagements] and use it to get people to comply.”

Welcome support from the financial sector

The Financial Services Task Force

In this sense, the financial services sector has a vital role to play. It will be both the catalyst and the driver of change in other industries.

The Prince of Wales has therefore launched the Sustainable Markets Initiative (SMI), co-chaired by Bank of America CEO Brian Moynihan. For SMI, the Terra Carta serves as a “guiding mandate”. It will be updated annually for the next ten years.

The Prince of Wales’ SMI recently announced that he has been joined by executives from major banks. Its members will form a new working group on financial services: the Financial Services Task Force (FSTF). He will include, among others, executives from HSBC, BNP Paribas, Barclays, NatWest, Bank of America. Its purpose will be to guide the investment community towards the net zero trajectory in preparation for COP26.

Building on the scaling up of voluntary carbon markets

This will build on work on scaling up voluntary carbon markets. By supporting, for example, the creation of a “deep and liquid global market for carbon credits”. This will ensure the flow of capital for emission reduction efforts.

In a statement confirming the development of the working group, Prince Charles expressed his desire to create a special cooperation:

“In launching the Sustainable Markets Initiative last year, my goal was to bring together global leaders, as part of a ‘Coalition of the Willing’.

And this, from all industries and almost all sectors of the economy. This working group therefore marks a first concrete achievement that meets its objectives.

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