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Britain's review of how banks can provide funds for companies to cut emissions will look at how to deal with "perverse" pressure on lenders to ditch polluting customers in order to reduce their own carbon footprint, the review's chair said on Tuesday.
The transition finance market review now underway aims to identify financial products and services that banks could offer companies to help them transition to a net zero economy by 2050.
As part of their own contribution to net zero, banks face pressure from climate campaigners to ditch polluting customers, making it harder to take on high-emitting customers that need finance to transition over coming years.
"It's an area that we need to consider as part of the review, and listen to what's the sense of real concern of financial institutions... and what are the ways that the concerns could be appropriately addressed," Vanessa Havard-Williams, the review's chair, told a City & Financial conference.
She said her review will draw on work by regulators such as the Monetary Authority of Singapore, which last year proposed in guidelines that banks "engage" with polluting customers so they transition in an orderly manner, rather than cut off loans or divest in them, she said.
The review, due to report back in July, will set out how financial products and services can help companies transition.
Last October Britain set out for listed companies and financial firms how they will decarbonise their business model over coming years to comply with a net zero economy by 2050.
The plans will likely include transition finance to explain how to pay for cutting emissions, Havard-Williams said.
The review is part of Britain's ambition to be a leading centre for transition financing, given an estimated $3-5 trillion will be spent globally each year on transition by the 2030s, with 50-60 billion pounds annually in Britain alone, she said.
Charlotte Vere, a junior finance minister, told the conference it was time for companies to implement their transition plans to mobilise "billions of pounds of investment" in Britain.
The transition finance market review was going to be a "gamechanger" she added.
Sacha Sadan, director of ESG at the Financial Conduct Authority, said it now boiled down to actually implementing transition plans.
"Your first transition plan won't be your best, but please get started," he said.
(Reporting by Huw Jones; Editing by Peter Graff)