Catherine McKenna, Canada’s former environment minister, told COP27 that too many companies’ pledges were “little more than empty slogans and hype”. The UN Secretary General António Guterres said that corporate net zero vows lacked robust rules which had left “loopholes wide enough to drive a diesel truck through”. The Financial Times highlighted what it called “a bracing report” released at COP27 from a group of experts the UN appointed to assess the mushrooming net zero promises from companies, cities and regions.  It concluded “dishonest climate accounting” had to stop. It said companies are claiming to be net zero while continuing to build or finance new supplies of fossil fuels.  They are relying on cheap and often dodgy carbon credits to offset their carbon pollution.  Too many organisations are basing their net zero plans on lower carbon intensity or emissions per unit of output.  Many are still lobbying against government climate policies. Lenders also need to be careful they aren’t tarred with the same brush here.   Take green mortgages:  On one hand, they are a force for good: they encourage people to look at their home’s energy efficiency at a time of rising rates and cost pressures and encourage the take up on better performing new builds.  On the other, will green mortgages really change behaviours fast enough given how expensive it will be to retrofit 20 million homes that are missing out on the best rates?? If not, aren’t they just… marketing to meet the zeitgeist? Treating climate change as a PR exercise won’t wash for lenders — because it is not in their interests to do so.  Lenders can’t just pay lip-service to climate risks as they are at the sharp end of the cost exposure here.  Lenders need to think tactically, as well as strategically, and need to do more to triage the very real risks they face from climate change on their secured loans. Climate change is the most significant external impact that our communities and businesses face. It will affect property and infrastructure assets, investment portfolios, lending and insurance markets. The scale of change and the potential risks are eye-watering and have major implications for property transactions. By way of example, while successive governments have channelled millions of pounds into flood defences to protect priority communities from the river network, this has only reduced the risk for those places.  Climate change allowances are redrawing the map of flood risk as each major flooding event occurs.  Even with this investment, there are thousands of undefended streams that have caused huge damage, with the insurance bill for the 2020 floods alone standing at £375m.  And surface water flood risk can happen anywhere.  Aged sewer networks have frequently backed-up filth into people’s properties when they can’t deal with a sudden deluge.  Lenders need to be ensuring these cost factors are being taken into account to protect and reduce capital asset risk. The tapering off of Flood Re as a support to the most vulnerable and high premiums or excesses for those just outside of this extra support, means there are major considerations for homebuyers and business owners in making their properties more resilient.  They will need to invest to mitigate against the risk. .  In the future, insurers will look more favourably on properties with in-built resilience — to soften the blow of the loss of Flood Re (or those areas that are still at risk but just outside of Flood Re support). Our focus is to help lenders and panel conveyancers have an informed conversation with their client about climate risks using our analysis.  We have just launched a new microsite to facilitate the implementation of new incoming climate guidance.  It will help conveyancers to triage risk for their lender clients while improving the information flow back to lenders.  The site examines the governance and compliance risks for law firms through the duty of care to advise lenders.  Alongside details explaining their client obligations in light of the legal opinion from Stephen Tromans KC, the site hosts a set of prepared clauses for use in commercial and residential transactions that property lawyers can insert into their client care summaries and reports on title to lenders. The clauses provide conveyancers with a method to easily highlight the risks to their clients in a compliant and consistent way — as well as explaining what their client should do next.  Six standard clauses are available for residential transactions and commercial property transactions. Users can simply extract and drop these clauses into their standard documentation, highlighting any specific potential issues from the environmental report as normal. This means lenders can instruct their panels to do more due diligence for them. Conveyancers now have the data and the resources to help guide and explain potential climate risks to their clients and their lender partners. So by all means in your ESG and sustainability comms, make a long-term net-zero commitment.  But as you work towards this, make triaging your climate change risk on lending a clear practical example of words put into action.  The tools are out there.  Now we need to walk the walk, as a joined up set of stakeholders, on behalf of the client.

David Kempster is a director of Groundsure