Lord mayor Michael Mainelli seeks UAE breakthrough as UK loses net-zero leader mantle

Insurance and London's bond markets can carry the climate goals of the UAE Consensus forward, he says

Michael Mainelli, Lord Mayor of the City of London. Getty Images / The National

The City of London's financial centre is seeking to entrench its role in the transition from fossil fuels to net zero with a visit by the lord mayor to the UAE this week that seeks to capture some of the progress of Cop28.

Michael Mainelli, the 695th lord mayor of the City of London, led a delegation to Dubai for the climate summit in November where he was keen to emphasise the role of markets over government. Since then, the UK's own role in the net-zero push has been called into question and Mr Mainelli concedes the country has lost its trailblazing status.

Not only did Rishi Sunak change tack on the changeover to electric vehicles but Labour leader Keir Starmer essentially scrapped a pledge to invest £28 billion ($34.85 billion) a year in a greener economy. "Now the UK is definitely not leading the pack -- not behind by any means -- just not at the forefront," Mr Mainelli told The National. "So the bragging rights are gone."

As numerous reports suggest, including some from leading Conservatives, the need to embrace the climate agenda cannot be wished away. "You're going to be dragged kicking and screaming into this if you don't do anything, or you're just going to be middle of the pack but actually if we're really ahead, we can make money out of this," he said.

Mr Mainelli's talks with officials in the UAE are set cover the development of carbon markets as well as the pool of debt finance for vulnerable countries seeking to issue sustainability-linked bonds – Kenya is about to become the third country after Chile and Uruguay to tap into London markets in this way.

There is also a strong role for insurance, he said highlighting the commitments the markets are already underwriting. "We will guarantee that this voluntary carbon market really will remove a tonne of carbon dioxide on the market," he said. "The voluntary carbon credits will actually really remove a tonne of carbon."

At Cop28, where he had "genuine admiration for the organisation" of the event, Mr Mainelli saw reinforced emphasis on carbon markets. He will seek the UAE's participation in the third Net Zero Delivery Summit hosted by the City of London in early June.

He said efforts by the EU and other jurisdictions to introduce carbon borders were too complex to succeed.

Brexit means the UK can break with the EU regime. Mr Mainelli reamed off some statistics, such as the financial centre now accounting for 15 per cent of global assets, up from 12 per cent, or that there are 120,000 more jobs and only 30,000 have migrated to Europe. Or that two fifths of foreign exchange trading is based in the UK.

He does not deny the negative drumbeat of headlines around the London Stock Exchange, which has lost out on big IPOs and has even been shaken by talk of giants such as Shell packing up for the US. Mr Mainelli said all big equity markets are being drained by the high costs of listing. "I would argue that we've made the cost of raising capital on equity markets too high," he said with regret. "We use them as a benchmark a tremendous amount and they form a public good in that regard.

"But we have made listing on them too expensive and some of it is direct national regulation, which requires certain things of listed companies that they don't require of other private companies. Some of it are the rules of the exchange itself. It's up to them to set their rules but there are arguments we could do a lot better to cut down the costs on traded markets."

Ethical AI

The frontiers of technology and finance evolve ever faster and Mr Mainelli spoke out for a form of regulatory evolution, including a City initiative to develop the international standards regime. "In the Gulf, I'm hoping to meet the accreditation bodies as standards bodies to see if they would be interested in joining that," he said. "If not now, then at some other point in the future.

"I would like more regulators to say this is a sensible approach for now as we reserve the right to go ahead and experiment in the less regulated areas of finance."

The burgeoning space sector is also on the agenda, with ideas around using insurance to address the growing threat of catastrophic space debris destruction. A proposal for insurance bonds for space debris retrieval, put forward by the insurers, closely resembles the surety bonds that London has issued for the mining sector, maritime activity or oil rigs.