10 steps to a Green Finance Economy
The Government’s Green Finance Taskforce, led by the Climate Change Minister, issued a “comprehensive and holistic package of measures” on how the UK Government and financial services sector could help fund the transition to a low-carbon economy. Drawing upon the insight of 140 organisations and a committee of experts, the Taskforce’s report provides guidance on the role of the UK financial services sector in developing the green economy and the importance of promoting investments aimed at reducing emissions. The report outlines 30 recommendations based on 10 themes, ranging from a branding relaunch of UK green finance activities to the development of green finance infrastructure. Overall the themes are ambitious, comprehensive and reiterate the need for an integrated green finance agenda.
The City of London – a City of Green Finance?
Enhancing London’s offer in green finance is expected to have a major impact on the capital’s global presence as a green finance leader. However, the Taskforce also highlights the need for the Government to issue a sovereign green bond – an important gesture that will reiterate the UK’s position as a serious and committed player in the global green finance arena. With France, Fiji, Poland, Indonesia and Nigeria all issuing sovereign green bonds, there is a real necessity for the UK to make its mark. The report already alludes to the UK’s waning reputation, noting that “other countries are taking a lead – both in shaping the global policy agenda and on developing and marketing new green finance products.”
The power of the financial services sector in driving the UK’s economy to a low-carbon model and reiterating the country’s position as a green finance hub cannot, and should not, be underestimated. The City has a strong history of promoting and developing green finance activity, with 64 green bonds listed in London and 13 renewable infrastructure funds with an aggregated value of over US$7 billion. Despite this, the green bond economy represents only a fraction of the global bond market. Inconsistencies in data and a lack of commonality in green corporate lending, real estate or securitisation, can prevent investors from seriously considering the green finance opportunities. Undoubtedly this is a wasted opportunity and action is needed to address these challenges.
A united front
Focused on 10 themes, the report’s recommendations emphasise the need for an integrated and aligned commitment from investors, companies, technology providers, regulators and local government. The emphasis on technological innovation is a prominent theme and highlights Government’s growing awareness and commitment towards fintech, blockchain and clean tech initiatives. The imminent establishment of a Green Investment Accelerator and Green Fintech Hub are two such examples and build upon the work of the UK’s Green Finance Taskforce, the global Task Force on Climate-related Financial Disclosures, and the City’s Green Finance Initiative to promote the UK as a centre for green finance.
Challenging times ahead
Globally the green finance sector is not growing fast enough, despite media awareness, institutional engagement and cross-party interest. A major problem is the lack of longitudinal research and knowledge on how to assess, measure and manage climate risk. The need for better communication and knowledge-sharing between climate impacts experts and businesses will be an important step in more effective and efficient corporate decision-making. The funding gap remains vast, but for the stakeholders who are impacted by and invested in developing the green finance economy, the opportunities are evidently immense.
Members of the Green Taskforce:
- Sir Roger Gifford (Chair), Representing the Green Finance Initiative
- Nikhil Rathi, CEO, London Stock Exchange
- Michael Sheren, Senior Adviser, Bank of England
- Robert Trezona, Head, Cleantech, IP Group
- Dr Rhian-Mari Thomas, Managing Director, Barclays
- Dr Daniel Klier, Group Head of Strategy and Global Head of Sustainable Finance, HSBC
- Edward Northam, Head of Investment Banking, Green Investment Bank
- Charlotte Morgan, Partner, Global Energy and Infrastructure Group, Linklaters
- Mark Zinkula, CEO, with Meryam Omi, Head of Sustainability and Responsible Investment Strategy, Legal and General Investment Management
- Dr Steve Waygood, Chief Responsible Investment Officer, Aviva Investors
- Emma Howard Boyd, Chair, Environment Agency
- Bruce Davis, Co-Founder, Abundance
- Fiona Reynolds, Managing Director, Principles for Responsible Investment
- Nick Molho, Executive Director, Aldersgate Group
- Dr Ben Caldecott, Founding Director, Oxford Sustainable Finance Programme, University of Oxford Smith School of Enterprise and the Environment
- Dr Paul Fisher, Senior Associate, University of Cambridge Institute for Sustainability Leadership
- Rowan Douglas, Chair and CEO of Capital Science & Policy Practice, Willis Towers Watson