According to a report published by the City of London Corporation’s Green Finance Initiative today (11 November) the UK leads the world in Green Finance because of the City’s mix of expertise and innovation.
The report, ‘Globalising Green Finance: the UK as an international hub’, produced by PricewaterhouseCoopers and commissioned by the City of London Corporation, shows what a globalised green financial sector might look like and the steps required to get there. It aims to help UK policymakers prioritise the green agenda, and stimulate wider discussion about the opportunities and challenges associated with the green markets.
Green Finance can fund any means of reducing carbon emissions or raising resource efficiency. The G20’s Green Finance Study Group defines the sector more specifically as the “financing of investments that provide environmental benefits in the broader context of environmentally sustainable development.” It is key to meeting the huge demands on investment being created by the world’s transition towards a low-carbon economy.
Global green bond issuance so far this year has totalled $65.4b, and there are 39 green bonds issued and listed on London Stock Exchange, raising in excess of $9.3 billion in seven currencies.
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The report highlights how and why the UK leads the global Green Finance sector, helping facilitate the global low-carbon transition, and makes a series of recommendations for the UK Government and business to help grow the sector, including:
- Consider giving powers to a new or existing independent body to set a long-term path for the UK’s green economy, with all major stakeholders involved and responsible for success. It is crucial to set a clear path for stimulating Green Finance, business, technologies, projects and innovation.
- Ensure that regulators prioritise climate-related financial risks and include green forward guidance in regulatory policy.
- Working with other financial centres to ensure there is consistency in the labelling, transparency and measuring of green financial products. An example of how this could be done is through the formal partnership announced today between China’s Green Finance Committee and the City of London’s Green Finance Initiative, which will convene a working party in 2017 to jointly address issues including “knowledge sharing and capacity building, supporting cross-border green financial flows, developing mutually agreeable product frameworks and addressing market impediments.”
- Leveraging the UK’s green financial expertise and international leadership to help construct a diversified, low-carbon domestic economy that works for everyone. This could include developing freely available green rankings and benchmarks; enhancing green financial education via professional qualifications; and issuing smaller denomination, local green products for retail investors and ISA savers.
There is a real opportunity to deliver a greener economy through financial markets and we will make sure the UK remains at the forefront of that effort.
The Economic Secretary to the Treasury, Simon Kirby, said:
“This report sets out a vision to make the UK’s world-leading green finance sector even more vibrant, innovative and global. There is a real opportunity to deliver a greener economy through financial markets and we will make sure the UK remains at the forefront of that effort.”
Sir Roger Gifford, Chairman of the City of London’s Green Finance Initiative, said:
“What this report shows is that the Green Finance sector in the UK is going from strength to strength. However, in order for it to be able to support fundamental economic change, the sector is looking for the ability to grow further and flourish in the coming years. I believe the recommendations put forward in the report, when enacted, will really help the sector become a gamer-changer in realising its full market potential.”
Jon Williams, financial services sustainability partner at PwC, said:
“The UK has the foundations to be a leading global green financial hub, and green finance has the potential to be a significant economic and environmental opportunity for the UK. The work of the Green Finance Initiative, and the vision and recommendations in this report, set out the blueprint and building blocks to make this a reality, and show that green and growth belong in the same sentence.”
The report was launched at a conference in the Square Mile on the future of Green Finance co-hosted by HM Treasury and the City of London’s Green Finance Initiative. This formed part of the 8th UK-China Economic and Financial Dialogue.