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Jul 03, 2019

UK launches far-reaching Green Finance Strategy

Initiative is latest step in establishing London as leading international center for green finance

In an attempt to cement the UK’s position as a global climate leader, the government has announced its Green Finance Strategy, which sets out plans to increase investment in sustainable projects and infrastructure.

The strategy looks to ensure financial risks and opportunities from climate change are integrated into mainstream financial decision-making and increase the availability of finance to exploit this economic opportunity – by bringing together the UK’s environmental expertise and global financial services sector.

Making the announcement at the third Green Finance Summit in London yesterday, the economic secretary to the Treasury and City minister John Glen argued that financial services will have a bigger role to play than any other sector in tackling climate change.

Last week the UK also became the first country in the G7 to legislate a move to net-zero emissions by 2050. The UK has stated that going green can be a ‘win-win’, reducing emissions by 42 percent while growing the economy by 72 percent, making the country the strongest performer in the G7.

It has further committed to spend at least £5.8 bn ($7.3 bn) on the government-supported initiative International Climate Finance, which encourages other nations to act on climate collaboratively, building on the £3.87 bn the UK spent on climate activities between 2011 and 2015.

London and the green India connection

The Green Finance Institute, co-funded by the UK government and the City of London Corporation, was also launched at the summit. The institute will look to create new opportunities for mobilizing finance for sustainable projects around the world – and will lead on the City of London’s Green Finance Partnerships with countries including India.

The Green Finance Strategy is also a call for collective action, setting out how the UK will work with industry, regulators, academia and international partners – such as India – to deliver the urgent and far-reaching change that is needed.

The UK and India are already working together to lead the fight on global challenges including climate change. Indian issuers have raised £1.5 bn on the London Stock Exchange through green bonds over the past two-and-a-half years – including through Indian Renewable Energy Development Agency’s groundbreaking £216 mn green masala bond.

The UK and Indian governments have also established the Green Growth Equity Fund, which intends to raise capital from institutional investors for investment in green and renewable energy projects in India.

Harnessing green finance to raise capital for India’s infrastructure investment requirements will be a central theme at the India Day event on July 16 hosted by the UK government and the City of London Corporation at Mansion House in London.

London green finance

Glen says in a statement: ‘The UK has a long history of leading the way in tackling climate change, but we need to do more to protect our planet for future generations. The City [of London] has a vital role to play in securing a greener future for us all.

‘Investing more in sustainable projects can not only protect our environment, but also help establish London as the pre-eminent international center for green finance. The Green Finance Strategy will support this ambition with new initiatives to boost funding for green ventures and ensure the environment is at the center of all financial decision-making.’

Natalie Toms, economic counsellor at the British High Commission New Delhi, adds: ‘The Green Finance Strategy is another welcome addition to the long list of actions the UK is taking domestically and internationally – including in partnership with India – to tackle climate change.

‘Both the UK and India are working together as a joint force for good on issues from renewable energy to climate resilience. I’m delighted that the new Green Finance Institute will help create even more opportunities for Indian organizations to raise green finance in London.’

Regulators’ perspective

Sir Win Bischoff, chair of the Financial Reporting Council (FRC), which is responsible for the UK’s corporate governance and stewardship codes, comments: ‘The effect of climate change on society and business is one of the defining issues of our time. As well as reporting on their impact on the environment, public companies and their boards should address the impact of climate change on their business. The FRC is pleased to play its part in supporting the UK’s Green Finance Strategy in co-operation with other regulators. Today we are outlining our actions to encourage and monitor companies’ responses.’

Andrew Bailey, CEO of UK financial regulator the Financial Conduct Authority, adds: ‘Climate change and the transition to a low-carbon economy will transform financial services markets and shape consumer priorities and needs. This brings unprecedented challenges for us in mitigating risks and enabling positive changes.

‘Working with other regulators and government is an essential part in our approach to successfully tackling these challenges. We welcome the shared understanding of the nature, importance and urgency of financial risks of climate change among the regulators and government.’

Sam Woods, CEO of the Prudential Regulation Authority (PRA), which oversees companies’ capital risk, notes: ‘Climate change has the potential to create significant financial risks for the firms the PRA regulates. The challenge we face in mitigating these risks is unprecedented, and we need to begin to act now if we are to ensure an orderly transition to a carbon-neutral economy. We will play our part and work with government, fellow regulators and industry through the UK government’s Green Finance Strategy, the Climate Financial Risk Forum and the Network for Greening the Financial System.’