[2021 Asia Financial Forum] Michael Sheren "Carbon Neutrality, Bankers' Role Crucial to Bear Costs"

Senior Advisor of the Bank of England: "We Must Reduce 'Net Carbon Emissions'"
"Financial Companies Should Actively Engage for Carbon Neutrality"

[Asia Economy Reporter Kiho Sung] "Let's take a mug as an example. If the cost of carbon emissions generated during its production process was included in the price, it would have been sold for 8 pounds instead of 2 pounds. Similarly, diesel car manufacturers have lower production costs because they are not charged for the pollution their diesel cars emit into the air."

Michael Sheren, Senior Advisor at the Bank of England (BOE), emphasized on the 25th at the Westin Chosun Hotel in Sogong-dong, Jung-gu, Seoul, during the '2021 Seoul Asia Financial Forum' that South Korea's 2025 carbon neutrality declaration requires a reduction in 'net carbon emissions.' Sheren, a former co-chair of the G20 Sustainable Finance Study Group, joined the Bank of England after working for over 25 years as an investment banker in New York and London.

He pointed out that the carbon costs generated during companies' product manufacturing and service processes are not included in the costs, causing an optical illusion. There is widespread 'free riding on negative externalities' in the carbon neutrality process. Sheren said, "Free riding on negative externalities is just a fancy name given to the harmful effects imposed on others," and added, "These negative impacts are not included in the costs of products and services."

Considering these costs, he urged financial institutions to take an active role in achieving carbon neutrality. He predicted that banks would support real economy participants by providing ▲green bonds ▲green loans ▲green lease contracts. Institutional investors would purchase green stocks and green bonds guaranteed by banks, and banks would form a cyclical relationship by supporting existing companies according to their standards or guaranteeing entrepreneurs starting new technology companies that meet carbon-neutral economic criteria.

Sheren emphasized, "Banks, insurance companies, pension funds, and sovereign wealth funds will play a crucial role in financing changes in the real economy," and added, "For change, bankers especially need to take the lead."

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